If a Country's Central Bank Seeks to Stabilize the Price

question 9

Multiple Choice

If a country's central bank seeks to stabilize the price level and if real shocks from abroad are important, then

• A) a flexible exchange rate is preferable to a fixed exchange rate.
• B) flexible and fixed exchange rates are equivalent.
• C) the central bank will not be able to realize its goal.
• D) a fixed exchange rate is preferable to a flexible exchange rate.
• E) the central bank should devalue under flexible exchange rates.

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