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Which of the following would cause the exchange rate to appreciate in a small open economy with floating exchange rate? The money supply is decreased. Government spending is decreased. Taxes are increased.
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Which of the following would cause the exchange rate to appreciate in a small open economy with floating exchange rate? The money supply is decreased. Government spending is decreased. Taxes are increased. The money supply is increased.

User Roger Dwan
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1 Answer

3 votes

Answer:

The money supply is decreased.

Step-by-step explanation:

If the money supply is decreased, it will cause the exchange rate to appreciate in a small open economy with floating exchange rate and in the new short-run equilibrium income falls.

User Punita
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