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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Definitions:

Equity Securities

Financial instruments that represent ownership interest in a company, such as stocks, granting holders a claim on part of the company's assets and earnings.

Insignificant Influence

Refers to a situation where an investor cannot exert significant control or influence over the investee company.

Significant Influence

The capacity to impact the financial and operating decisions of another entity without having full control over it.

Available-for-Sale Debt Securities

Debt instruments not classified as held-to-maturity or trading securities, reported at fair value with unrealized gains or losses in other comprehensive income.