In the Monetary Small Open-Economy Model with a Fixed Exchange

question 6

Multiple Choice

In the monetary small open-economy model with a fixed exchange rate,the domestic

• A) government loses control over the level of domestic government spending.
• B) government loses control over the level of domestic taxes.
• C) government loses control over the level of domestic government spending and domestic taxes.
• D) central bank loses control over the domestic stock of money.

---

Definitions:

Currency

The system of money in general use in a specific country, consisting of banknotes and coins, that is accepted as a medium of exchange.

Overdraft Privileges

A feature offered by banks allowing an account holder to withdraw more money than is currently available in their account, often for a fee.

Fee

A charge for services rendered or for access or admission to facilities or events.

Banks

Banks are financial institutions licensed to receive deposits and provide loans, along with offering various other financial services.