Question

The government is currently devising plans to encourage growth in the export market. As an advisor to the government, what would your advice be to the when it comes to performing monetary policies which could affect aggregate demand through the exchange rate channel?     

Answer 1

Here it is Given that Country is promoting the Exports....

How the exportrs can be promoted ??

By offering the value for money goods or by offering very cheaper goods...

when the above thinngs can be possible how the country's monetory policy can impact cost of making the goods and services??

the interest rate that bank takes on the loans can impact the cost of goods and services. if banks takes the higher interest rate the cost making goods or providing the services can increase due to higher Finance cost so, Central Bank should Encourage the Export oriented units by providing the lower interest loan to them.

Another way the monetary policy can affect is the Foriegn exchange restrictions, in such sitiation central bank have to make free arrangements for the free conversion of the foriegn exchanges and do not put much restrictions on it.

by arragingf the lower cost of goods and free Currency flows central bank can encourage the exports.

I hope my Efrrots will be fruitful to you