Which of the Following Is True for an Economy That

question 12

Multiple Choice

Which of the following is true for an economy that allows its currency to float freely?

• A) A reduction in interest rates is not offset by a reduction in the exchange rate.
• B) Expansionary fiscal policy will be neutralized by rising interest rates and falling exports.
• C) Monetary policy is more effective than fiscal policy in raising aggregate demand.
• D) A reduction in interest rates depresses international demand for domestic goods and

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