All other things being equal, if a central bank implements a significant increase in its base interest rate (policy rate), which of the following is most likely to occur as a direct result of the monetary transmission mechanism?
An appreciation of the domestic currency's exchange rate and a fall in net exports.
An increase in the market prices of existing fixed-coupon government bonds.
A faster rate of growth of aggregate demand stimulated by positive wealth effects.
A decrease in the cost of borrowing for commercial banks from the central bank.
