Which of the Following Is a Correct Statement About the Effects

question 23

Multiple Choice

Which of the following is a correct statement about the effects of monetary and fiscal policies?

• A) Monetary policy is effective under a fixed exchange rate regime, but not under flexible rates.
• B) A monetary shock will shift the aggregate demand curve in the same direction, whether exchange rates are fixed or flexible.
• C) A real shock will shift the aggregate demand curve under fixed but not flexible exchange rates.
• D) Monetary policy can always be used to correct real shocks, whether exchange rates are fixed or flexible.

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Definitions:

Dividend

A portion of a company's earnings distributed to its shareholders as a return on investment.

Rate Of Yield

A financial metric that calculates the amount of profit or loss an investment generates, relative to its cost.

Preferred Stock

A type of stock that offers dividends and/or liquidation preference over common stock.

Par

The face value of a bond or stock, or the standard level for a currency.