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An expansionary monetary policy would be more effective if it caused Group of answer choices a)...

An expansionary monetary policy would be more effective if it caused

Group of answer choices

a) interest rates to decrease, leading to an exchange rate depreciation and a rise in net exports.

b) interest rates to increase, leading to an exchange rate depreciation and a rise in net exports.

c) interest rates to increase, leading to an exchange rate appreciation and a fall in net exports.

d) interest rates to decrease, leading to an exchange rate appreciation and a fall in net exports.

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Answer #1

Answer- Correct option is 'a'

An expansionary monetary policy would be more effective if it caused interest rates to decrease, leading to an exchange rate depreciation and a rise in net exports. Expansionary monetary policy is when a central bank uses its tools to stimulate the economy. That increases the money supply, lowers interest rates and increases demand. It boost the economic growth. It lowers the value of currency thereby decreasing the exchange rate. A lower exchange rates causes exports to increase and import to decrease and the balance of trade or net export to increase.

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