The Fixing of Exchange Rates in Europe Means That, If

question 89

Multiple Choice

The fixing of exchange rates in Europe means that, if Italy experiences an expansion and the others do not,

• A)Italy will have to drop out of the fixed exchange rate system to regain control over its inflation.
• B)Italy can use fiscal policy but not monetary policy to cool down the economy.
• C)Italy cannot use fiscal or monetary policy to cool down the economy.
• D)Italy can use monetary policy but not fiscal policy to cool down the economy.
• E)inflation will spiral out of control in Italy.

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