Suppose a Country Switches from a Fixed to a Flexible

question 43

Multiple Choice

Suppose a country switches from a fixed to a flexible exchange rate.Which of the following will occur as a result of this change?

• A)Monetary policy will become a less effective tool for changing output.
• B)A given change in government spending will now have a greater effect on output.
• C)Both fiscal and monetary policy will become more effective in changing GDP.
• D)Both fiscal and monetary policy will become completely ineffective in changing GDP.
• E) none of the above

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