Under fixed exchange rates
A) monetary policy is not an effective policy.
B) fiscal policy is not an effective policy.
C) monetary policy and fiscal policy are not effective.
D) both monetary and fiscal policies are effective.
E) monetary policy has an unpredictable effect on the domestic money supply.

Question

Quizplus · Accepted Answer

Under fixed exchange rates, the exchange rate is determined by the government or central bank and cannot be influenced by monetary policy. Therefore, monetary policy is not an effective policy in influencing economic activity or the exchange rate.

Under Fixed Exchange Rates