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My Econ textbook claims that both Expansionary and Contractionary Monetary Policy decrease US Exports, however a youtube video and other sources claim that explansionary monetary
My Econ textbook claims that both Expansionary and Contractionary Monetary Policy decrease US Exports, however a youtube video and other sources claim that explansionary monetary policy ultimately increases net exports. I am confused on which policy increases exports and which policy decreases exports, or if they both simply decrease them and why.
The net export effect of expansionary monetary policy: - Expansionary monetary policy causes interest rates to fall - Such a decrease will induce international outflows of funds - The resulting decrease in the demand for dollars reduces the international value of the dollar - U.S. exports become more expensive abroad, and U.S. imports become less expensive - The net effect will be in the same direction as the monetary policy effect, thereby amplifying the effect of such policyThe net export effect of contractionary monetary policy: - Such policy boosts the market interest rate. - Higher rates attract foreign investment. - The international price of the dollar rises. - Appreciation of the dollar reduces net exports. - There is a negative net export effectStep by Step Solution
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