Question

Commodity​ Prices, the​ Dollar, and Monetary Policy. Suppose the U.S. is a major source of demand for world commodities and supplies of commodities are limited. Expansionary monetary policy could affect commodity prices because A. international prices will rise as U.S. supplies​ increase, increasing domestic prices. B. international prices will​ fall, since U.S. demand for commodities is rising causing domestic prices to rise. C. domestic prices will rise as aggregate demand​ increases, and since supplies of commodities are​ limited, world prices will also rise. D. domestic prices will fall as the expansion of the money supply​ occurs, causing international prices to rise in compensation. Following a monetary​ expansion, the value of the dollar will A. ​fall, resulting in lower foreign commodity​ demand, decreasing commodity prices. B. ​rise, resulting in lower foreign commodity​ demand, decreasing commodity prices. C. ​fall, resulting in greater foreign commodity​ demand, increasing commodity prices. D. ​rise, resulting in greater foreign commodity​ demand, increasing commodity prices.

Answer 1

Answer.)

Suppose the U.S. is a major source of demand for world commodities and supplies of commodities are limited. Expansionary monetary policy could affect commodity prices because

->  C. domestic prices will rise as aggregate demand​ increases, and since supplies of commodities are​ limited, world prices will also rise.

Following a monetary​ expansion, the value of the dollar will

-> C. ​fall, resulting in greater foreign commodity​ demand, increasing commodity prices