The Monetary Authority of a Country That Pursues a Fixed

question 3

Multiple Choice

The monetary authority of a country that pursues a fixed exchange rate policy is unable to

• A) utilize a Taylor rule.
• B) respond to output gaps.
• C) fight inflation increases.
• D) all of the above.
• E) only a and c.

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Definitions:

Quotas

Regulatory measures imposing limits on the amount or value of goods that can be traded, typically used in international trade.

Export Subsidies

Government payments made to domestic firms to encourage exports.

Tariff

A tax imposed on imported goods and services to increase their price, intended to protect domestic industries and adjust trade deficits.

Tax

A mandatory financial charge or levy imposed by a government on individuals or entities to fund public services and projects.