Under a fixed exchange rate regime, an expansionary fiscal policy would ____ interest rates and GDP, which would cause ____ pressure on the exchange rate, forcing the monetary authority to undertake a(n) ______ monetary policy.
A) raise; downward (appreciation); expansionary
B) lower; upward (depreciation); contractionary
C) raise; upward (depreciation); contractionary
D) lower; downward (appreciation); expansionary

Question

Quizplus · Accepted Answer

The Answer of Under a fixed exchange rate regime, an expansionary fiscal policy would ____ interest rates and GDP, which would cause ____ pressure on the exchange rate, forcing the monetary authority to undertake a(n) ______ monetary policy.
A) raise; downward (appreciation); expansionary
B) lower; upward (depreciation); contractionary
C) raise; upward (depreciation); contractionary
D) lower; downward (appreciation); expansionary

Under a Fixed Exchange Rate Regime, an Expansionary Fiscal Policy