In the Mundell-Fleming Model with Fixed Exchange Rates, Attempts by the Central

question 3

Multiple Choice

In the Mundell-Fleming model with fixed exchange rates, attempts by the central bank to decrease the money supply:

• A) lead to a lower equilibrium level of income.
• B) lead to a higher equilibrium level of income.
• C) must be abandoned in order to maintain the fixed exchange rate.
• D) must be offset by expansionary fiscal policy.