ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Value of dollar increases, imports and exports both increase
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value of dollar increases, imports increase and exports decrease
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value of dollar decreases, imports increase, and exports decrease
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value of dollar decreases, imports decrease and exports increase
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Detailed explanation-1: -The Federal Reserve has three expansionary monetary policy methods: lowering interest rates, decreasing banks’ reserve requirements, and buying government securities. Expansionary monetary policy’s aim is to make it easier for individuals and companies to borrow and spend money-actions that all stimulate the economy.
Detailed explanation-2: -Expansionary or easy money policy: The Fed takes steps to increase excess reserves, banks can make more loans increasing the money supply, which lowers the interest rate and increases investment which, in turn, increases GDP by a multiple amount of the change in investment.
Detailed explanation-3: -When the Federal Reserve increases the federal funds rate, it typically increases interest rates throughout the economy, which tends to make the dollar stronger. The higher yields attract investment capital from investors abroad seeking higher returns on bonds and interest-rate products.
Detailed explanation-4: -Expansionary monetary policy works by expanding the money supply faster than usual or lowering short-term interest rates. It is enacted by central banks and comes about through open market operations, reserve requirements, and setting interest rates.