Flexible exchange rates hamper fiscal policy but reinforce monetary policy.

Name: Flexible exchange rates hamper fiscal policy but reinforce monetary policy.
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Question

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When a country has flexible exchange rates, its fiscal policy is limited because changes in government spending and taxation do not directly affect the exchange rate. However, flexible exchange rates reinforce monetary policy because changes in interest rates can affect the exchange rate and trade balance.

Flexible Exchange Rates Hamper Fiscal Policy but Reinforce Monetary Policy