Other things equal, to temporarily offset an appreciation in the dollar's exchange value, the Federal Reserve could ____ the U.S.money supply, which would promote a (an) ____ in U.S.interest rates and a ____ in investment flows to the United States.
A) increase, decrease, decrease
B) increase, increase, decrease
C) decrease, decrease, decrease
D) decrease, increase, decrease

Question

Quizplus · Accepted Answer

Increasing the U.S. money supply would typically lead to a decrease in U.S. interest rates, which in turn would decrease investment flows to the United States, countering the appreciation of the dollar.

Other Things Equal, to Temporarily Offset an Appreciation in the Dollar's