Internal Shocks to an Economy with a Fixed Exchange Rate

question 10

Multiple Choice

Internal shocks to an economy with a fixed exchange rate will:

• A)have the same types of impacts as monetary and fiscal policy changes.
• B)have no impact on the domestic economy but will lead to external imbalances.
• C)have no impact on both the country's internal balance and the country's balance of payments.
• D)have no impact on the country's internal balance but will change the country's balance of payments.

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Definitions:

Canada and Mexico

Two countries that border the United States and are significant trade partners, especially in the context of the North American Free Trade Agreement (NAFTA).

Income Distribution

How a nation’s total GDP is distributed amongst its population, affecting economic inequality and standard of living.

Marketing Professional

A professional skilled in creating and executing marketing strategies to promote products, services, or brands.

Middle-Income Households

Households with income levels in the middle range of a country's income distribution, often considered the middle class.