In an Open Economy with Flexible Exchange Rates, Monetary Policy

question 105

Multiple Choice

In an open economy with flexible exchange rates, monetary policy affects ________ through changes in the real interest rate and affects ________ through changes in the exchange rate.

• A)taxes and saving; net exports
• B)net exports; taxes and saving
• C)productivity and growth; consumption
• D)consumption and investment; net exports

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Definitions:

Transfer Prices

Prices charged for the sale of goods or services between departments or subdivisions of the same company.

Variable Cost

Expenses that fluctuate in direct proportion to the production or sales volume, including the costs of raw materials and direct labor.

Outside Supplier

A company or entity that provides goods or services to another company but is not part of that company's corporate structure.

Packing And Shipping Costs

Expenses associated with preparing and sending goods to customers, including materials for packing and freight charges.