If a Country Under a Fixed Exchange Rate Regime Wanted

question 49

Multiple Choice

If a country under a fixed exchange rate regime wanted to pursue contractionary policies, ceteris paribus,

• A)net exports would rise and capital inflows would fall, putting offsetting pressure on the exchange rate.
• B)net exports would fall and capital inflows would rise, putting offsetting pressure on the exchange rate.
• C)net exports and capital inflows would rise, and upward pressure would be placed on the exchange rate.
• D)net exports and capital inflows would fall, and downward pressure would be placed on the exchange rate.

Realize the impact of macroeconomic policies (fiscal and monetary) on aggregate demand and aggregate supply.

Comprehend the role and critiques of discretionary fiscal policy in stabilizing the economy.

Grasp the significance of expectations (rational and otherwise) in influencing the effectiveness of macroeconomic policy.

Evaluate the time-inconsistency problem and its implications for economic policy.

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Definitions:

Municipal Dump

A designated area operated by a local government where waste and trash are disposed of and sometimes processed or recycled.

Old Bicycle

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Stolen

Refers to property that has been taken without permission or authorization, implicating an act of theft.

Improvements

Improvements refer to changes or additions made to property or assets that enhance their value, utility, or appearance.