Suppose a Country Switches from a Fixed to a Flexible

question 10

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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