In a system of flexible exchange rates, a reduction in the money supply will cause
a. a rise in the value of the dollar relative to foreign currencies.
b. a fall in the value of the dollar relative to foreign currencies.
c. no change in the value of the dollar relative to foreign currencies.
d. a change in the value of the dollar relative to foreign currencies but the direction of the change is uncertain.
Question 2
In the Keynesian model, and expected increase in the interest rate
a. increases the demand for bonds and the demand for money.
b. increases the demand for bonds and the demand for stocks.
c. decreases the demand for bonds and increases the demand for money.
d. increases the demand for bonds and decreases the demand for money.
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