Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help with following mcq: 1)Why does a fixed exchange rate regime (like the gold standard) restrict the conduct of monetary policy? i. In a

please help with following mcq:

1)Why does a fixed exchange rate regime (like the gold standard) restrict the conduct of monetary policy? i. In a fixed exchange rate regime, the central bank guarantees a fixed price for its domestic currency (or gold) against other currencies. To ensure this, it may have to manipulate the demand for the domestic currency (raising or depressing it) to keep the price stable. The quickest way to for this is through the interest rate, which they cannot use simultaneously to influence aggregate demand. ii. In a fixed exchange rate regime, the central bank cannot vary the exchange rate in order to influence net exports. iii. The more constraints a policymaker faces, the harder it is to achieve their objectives. iv. In a fixed exchange rate regime, the government promises not to change anything.

  • A.i and iv are correct.
  • B.i and iii are correct.
  • C.iii and iv are correct.
  • D.i and ii are correct.

2)Governments raise taxes and spend the funds on infrastructure. Why do they do this? i. To buy the 'goodwill' and support of the public. ii. Large parts of government spending are autonomous (independent of the business cycle). High levels of government spending help to stabilise the macroeconomy. iii. State spending could encourage economic development and increase the potential tax they could raise. iv. Government spending can be used to redistribute disposable income.

  • A.i and ii
  • B.ii and iv
  • C.i and iii
  • D.iii and iv

3)Suppose a country with a fixed exchange rate decides to increase the price of its currency. This change in policy is called

  • A.an appreciation.
  • B.a revaluation.
  • C.a depreciation.
  • D.a devaluation.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Development And The Washington Consensus A Pluralist Perspective

Authors: John Marangos

1st Edition

042953485X, 9780429534850

More Books

Students also viewed these Economics questions

Question

=+b) What do you conclude?

Answered: 1 week ago

Question

8. What are the costs of collecting the information?

Answered: 1 week ago