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Question
A contractionary monetary policy causes
A) higher interest rates, which increases the international price of the dollar and decreases net exports.
B) higher interest rates, which decreases the foreign demand for U.S. financial instruments, raising the international price of the dollar and increasing net exports.
C) lower interest rates, which decreases the foreign demand for U.S. financial instruments, raising the international price of the dollar and increasing net exports.
D) higher interest rates, which increases the foreign demand for U.S. financial instruments, which causes interest rates to decrease. There is no effect on net exports.
Answer
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