Under fixed exchange rates with perfect capital mobility the most effective aggregate demand management policy is:
A) monetary policy.
B) devaluation.
C) fiscal policy.
D) industrial subsidy.

Question

Quizplus · Accepted Answer

Under fixed exchange rates with perfect capital mobility, fiscal policy is most effective because monetary policy is constrained by the need to maintain the fixed exchange rate, and devaluation is not an option under fixed rates.

Under Fixed Exchange Rates with Perfect Capital Mobility the Most