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30 October, 18:46

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.

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  1. 30 October, 19:01
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    The money supply is decreased.

    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.
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