The sequence of events following a contractionary monetary policy would be higher interest rates followed by dollar
A)depreciation, higher exports, and lower imports.
B)depreciation, lower exports, and higher imports.
C)appreciation, lower exports, and higher imports.
D)appreciation, higher exports, and lower imports.

Question

Quizplus · Accepted Answer

Contractionary monetary policy typically leads to higher interest rates, which attract foreign capital seeking higher returns, leading to an appreciation of the domestic currency. A stronger currency makes exports more expensive and imports cheaper, thus lowering exports and increasing imports.

The Sequence of Events Following a Contractionary Monetary Policy Would