Fiscal policy can have different effects depending whether the exchange rate is fixed or flexible. Who sets the Canadian exchange rate policy?
A) the U.S. Federal Reserve Bank
B) the Royal Bank of Canada
C) the Bank of Canada
D) the Toronto Stock Exchange

Question

Quizplus · Accepted Answer

The Bank of Canada is responsible for setting Canadian monetary policy, which includes managing the exchange rate. The government can influence the exchange rate through fiscal policy, but it is ultimately the responsibility of the central bank to manage the exchange rate. Neither the U.S. Federal Reserve Bank nor the Toronto Stock Exchange have any authority over Canadian exchange rate policy. While the Royal Bank of Canada is a major player in the Canadian financial sector, it is a private institution and therefore does not set national monetary or exchange rate policies.

Fiscal Policy Can Have Different Effects Depending Whether the Exchange