Which of the Goals Pursued by Policymakers in an Open

question 71

Multiple Choice

Which of the goals pursued by policymakers in an open economy is desirable because it can reduce the severity of business cycles?

• A) exchange-rate stability
• B) monetary policy independence
• C) free capital flows
• D) appreciation of the domestic currency

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Definitions:

Public Sector

Part of the economy that is controlled by the government, including all public services and government-owned entities.

Principal-Agent Problem

A dilemma in which one party (the agent) may not act in the best interest of another party (the principal) who has delegated some decision-making authority to the agent.

Political Process

The set of activities involved in the acquisition and exercise of power within a governmental or organizational setting.

Voters' Interest

The concerns or benefits that motivate individuals to participate in political activities, including voting.