Assume we have an economy currently in a recession with a fixed exchange rate system. In order to expand the economy, the government should

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Quizplus · Accepted Answer

In a fixed exchange rate system, the government cannot manipulate the exchange rate to stimulate the economy. Therefore, the best option for the government to expand the economy would be to use expansionary fiscal policy. This would involve increasing government spending and/or decreasing taxes to increase aggregate demand and stimulate economic growth.

Assume We Have an Economy Currently in a Recession with a Fixed