Given an Open Economy with High Capital Mobility, Under a System

question 40

Multiple Choice

Given an open economy with high capital mobility, under a system of managed-floating exchange rates with heavy exchange rate intervention

• A) fiscal policy is more successful in promoting internal balance, while monetary policy is less successful.
• B) monetary policy is more successful in promoting internal balance, while fiscal policy is less successful.
• C) both fiscal policy and monetary policy are equally successful in promoting internal balance.
• D) neither fiscal policy nor monetary policy are successful in promoting internal balance.