Which of the following statements about the effectiveness of the fiscal and the monetary policies in response to a recession in a small open economy is true?
A)In recession,fiscal policy is ineffective,but monetary policy is effective.
B)In recession,fiscal policy is effective,but monetary policy is ineffective.
C)In recession,both fiscal and monetary policies are effective.
D)In recession,both fiscal and monetary policies are ineffective.

Question

Quizplus · Accepted Answer

In a small open economy, fiscal policy is often less effective due to capital mobility and exchange rate effects, while monetary policy can be effective in influencing interest rates and exchange rates to stimulate the economy.

Which of the Following Statements About the Effectiveness of the Fiscal