Under the monetary approach to exchange rates, if the exchange rate has appreciated, this suggests that:
A) the home country's money supply has risen.
B) the foreign country's money supply has risen.
C) the home country's income has fallen.
D) the foreign country's money supply has fallen.

Question

Quizplus · Accepted Answer

Under the monetary approach, an appreciation of the home currency suggests a decrease in the foreign country's money supply, leading to a higher value of the home currency relative to the foreign currency.

Under the Monetary Approach to Exchange Rates, If the Exchange