Economic theory and experience since 1973 indicate that, under floating exchange rates, a country's fiscal and monetary policies in the short run and the long run can
A) have both domestic and foreign economic impact.
B) have domestic or foreign economic impact, but not both.
C) have domestic but not foreign economic impact.
D) have foreign but not domestic economic impact.
E) have neither domestic nor foreign economic impact.

Question

Quizplus · Accepted Answer

Floating exchange rates allow for a country's fiscal and monetary policies to have both domestic and foreign economic impacts. This is because changes in these policies can affect the exchange rate, which in turn can affect trade, investment, and inflation both within the country and abroad. Therefore, option A is the correct choice.

Economic Theory and Experience Since 1973 Indicate That, Under Floating