Question

Expansionary monetary policy is more effective in an open economy because:_______ A. Open market operations can be used to buy and sell foreign as well as domestic bonds. B. Interest rate decreases also reduce the government budget​ deficit, which reduces the current account deficit and increases demand. C. Interest rate decreases also reduce the value of the​ dollar, which increases net exports and further increases aggregate demand. D. Decreases in interest rates have an impact on foreign direct​ investment, encouraging the construction of factories and the purchase of stocks.

Answer 1

The correct answer is:

B. Interest rate decreases also reduce the government budget​ deficit, which reduces the current account deficit and increases demand.

Step-by-step explanation:

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