In the New Keynesian Open Economy Model, If the Exchange

question 47

Multiple Choice

In the New Keynesian open economy model, if the exchange rate is fixed

• A) fiscal policy and monetary policy are powerless.
• B) fiscal policy is an effective stabilization tool.
• C) a change in current total factor productivity increases output.
• D) monetary policy is an effective stabilization tool.
• E) the real interest rate is an effective tool that can be changed by the central bank.

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Definitions:

Debt Securities

Financial instruments representing money borrowed that must be repaid, including bonds, notes, and bills.

Equity Securities

Equity securities are financial assets representing ownership interest in a company, such as stocks, and can generate income through dividends or capital gains.

Strategic Purposes

Objectives or goals that are designed to achieve the long-term vision of an organization through planned and purposeful actions.