If a country chooses to have a monetary policy oriented toward domestic goals and a fixed exchange rate,then

Question

Quizplus · Accepted Answer

A fixed exchange rate system requires the central bank to intervene in the foreign exchange market to maintain the exchange rate. In this situation, the central bank cannot have the freedom to allow international capital movements. If it did, then it would be difficult or even impossible to maintain the fixed exchange rate. This restriction on international capital movements is a necessary aspect of a fixed exchange rate system.

If a Country Chooses to Have a Monetary Policy Oriented