Given an open economy with high capital mobility,all of the following statements are true except:
A) fiscal policy is strengthened under fixed exchange rates
B) monetary policy is weakened under fixed exchange rates
C) monetary policy is strengthened under floating exchange rates
D) fiscal policy is strengthened under floating exchange rates

Question

Quizplus · Accepted Answer

In an open economy with high capital mobility, fiscal policy is not strengthened under floating exchange rates because any fiscal expansion can lead to currency appreciation, which offsets the initial increase in aggregate demand.

Given an Open Economy with High Capital Mobility,all of the Following