Asked by Nurul Syairah on May 12, 2024
Verified
An expansionary monetary policy tends to ___ the U.S.dollar relative to foreign currencies and to ____ our balance of trade.
A) raise;help
B) raise;hurt
C) lower;help
D) lower;hurt
Expansionary Monetary Policy
Monetary policy measures, such as lowering interest rates and increasing money supply, used by central banks to stimulate economic growth.
U.S. Dollar
The official currency of the United States, widely used as a standard of value and medium of exchange globally.
Balance Of Trade
The difference in value between a country's imports and exports over a given period.
- Understand the functions and instruments employed by the Federal Reserve in the administration of monetary policy.
- Examine the impact of decisions related to monetary policy on the global valuation of the U.S. dollar and the trade equilibrium.
Verified Answer
AA
Athithiya AnandarajahMay 13, 2024
Final Answer :
C
Explanation :
An expansionary monetary policy typically involves lowering interest rates to stimulate economic growth. Lower interest rates can lead to a depreciation of the domestic currency (in this case, the U.S. dollar) relative to foreign currencies. This depreciation makes domestic goods cheaper for foreign buyers, potentially improving the balance of trade by increasing exports.
Learning Objectives
- Understand the functions and instruments employed by the Federal Reserve in the administration of monetary policy.
- Examine the impact of decisions related to monetary policy on the global valuation of the U.S. dollar and the trade equilibrium.