When a Country's Central Bank Temporarily Switches from an Expansionary

question 156

Multiple Choice

When a country's central bank temporarily switches from an expansionary to a more conservative monetary policy, one would expect the exchange rate to:

• A) depreciate in the short run, then return to its initial value.
• B) appreciate in the short run, then return to its initial value.
• C) depreciate in the short run and then stay higher.
• D) appreciate in the short run and then stay lower.

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