The monetary transmission mechanism in an OPEN economy is more complicated than it is in a closed economy because the effects of domestic monetary contraction or expansion are weakened because changes in the domestic money supply cause changes in the exchange rate which then offset the changes in desired investment. strengthened because domestic interest rates must be equal to those in the rest of the world. strengthened because changes in autonomous expenditure cause monetary effects that influence interest rates in the rest of the world. weakened because changes in autonomous expenditure cause monetary effects that influence interest rates in the rest of the world. strengthened because changes in the domestic money supply cause changes in the exchange rate, which then reinforce the changes in desired investment.
The monetary transmission mechanism in an OPEN economy is more complicated than it is in a closed economy because the effects of domestic monetary contraction or expansion are weakened because changes in the domestic money supply cause changes in the exchange rate which then offset the changes in desired investment. strengthened because domestic interest rates must be equal to those in the rest of the world. strengthened because changes in autonomous expenditure cause monetary effects that influence interest rates in the rest of the world. weakened because changes in autonomous expenditure cause monetary effects that influence interest rates in the rest of the world. strengthened because changes in the domestic money supply cause changes in the exchange rate, which then reinforce the changes in desired investment.
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Open-economy Macroeconomics: Basic Concepts
Section: Chapter Questions
Problem 6PA
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3. The monetary transmission mechanism in an OPEN economy is more complicated than it is in a closed economy because the effects of domestic monetary contraction or expansion are
weakened because changes in the domestic money supply cause changes in the exchange rate which then offset the changes in desired investment.
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strengthened because domestic interest rates must be equal to those in the rest of the world.
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strengthened because changes in autonomous expenditure cause monetary effects that influence interest rates in the rest of the world.
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weakened because changes in autonomous expenditure cause monetary effects that influence interest rates in the rest of the world.
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strengthened because changes in the domestic money supply cause changes in the exchange rate, which then reinforce the changes in desired investment.
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