Question

when a country's central bank increases the money supply, which statement best predicts the consequences? a. its price level rises, and its currency appreciates relative to other currencies in the world. b. its price level rises, and its currency depreciates relative to other currencies in the world. c. its price level falls, and its currency appreciates relative to other currencies in the world. d. its price level falls, and its currency depreciates relative to other currencies in the world.

Answer 1

When a country's central bank increases the money supply, the price level rises, and the currency depreciates relative to other currencies in the world.

Step-by-step explanation:

When a country's central bank increases the money supply, the most likely consequence is that the price level will rise and the currency will depreciate relative to other currencies in the world. This happens because increasing the money supply leads to an increase in inflation, which raises prices. Additionally, a country's currency depreciates as the increase in money supply weakens its value compared to other currencies.