Which of the Following Explains Why a Monetary Policy in a Nation

question 72

Multiple Choice

Which of the following explains why a monetary policy in a nation with an exchange rate peg, such as Denmark, would NOT be possible?

• A) The nation must keep its import tariffs in sync with the import tariffs of the nation to which it pegs.
• B) The nation must keep its price level and nominal interest rate equal to the price level and nominal interest rate in the nation to which it pegs.
• C) The nation must keep its taxes and budget deficit in sync with taxes and budget deficit in the nation to which it pegs.
• D) The nation is no longer able to print its own money, since it is using the currency of the nation to which it pegs.

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