Under the Monetary Approach to the Exchange Rate

question 37

Multiple Choice

Under the monetary approach to the exchange rate

• A) a reduction in the money supply will cause immediate currency depreciation.
• B) a rise in the money supply will cause currency depreciation.
• C) a rise in the money supply will cause immediate currency appreciation.
• D) a rise in the money supply will cause depreciation.
• E) a rise in the money supply will cause immediate currency depreciation.

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Definitions:

Tax

A mandatory monetary fee or different kind of tax enforced on a taxpayer by a government entity.

Supply

The aggregate supply of a distinct item or service offered to purchasers.

Cloth

A material made from fibers, woven or knitted together, used to make garments and other items.

Severe Drought

An extended period of exceptionally low rainfall, leading to a shortage of water.