Flexible exchange rates ___________ of monetary policy to stabilize the economy and fixed exchange rates __________ of monetary policy to stabilize the economy.

Question

Quizplus · Accepted Answer

Flexible exchange rates allow monetary policy to be more effective in stabilizing the economy by letting the currency adjust to economic conditions. Fixed exchange rates, however, limit the ability of monetary policy to stabilize the economy because the central bank must focus on maintaining the exchange rate.

Flexible Exchange Rates ___________ of Monetary Policy to Stabilize the Economy