If the central bank expands the money supply under floating exchange rates, it potentially stimulates the economy in two ways, namely:

A) by raising the price level and by increased competition.
B) by lowering the rate of interest and by causing a depreciation of the currency.
C) by creating higher spending and by increasing the budget deficit.
D) by increasing worker productivity and creating R&D incentives for firms.


Answer: B) by lowering the rate of interest and by causing a depreciation of the currency.

Economics

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