If monetary policy must be used to set the market equilibrium value of the exchange rate equal to the official value, it:
A)is no longer available to stabilize the domestic economy.
B)will be unable to stabilize the market equilibrium value of the exchange rate.
C)will simultaneously stabilize the domestic economy.
D)will increase the rate of growth in the economy.

Question

Quizplus · Accepted Answer

Monetary policy cannot be used for all purposes at the same time. If monetary policy is used to influence foreign exchange rates, it cannot simultaneously be used to influence the domestic economy.

If Monetary Policy Must Be Used to Set the Market