The desire of governments to be able to use both monetary and fiscal policies to pursue domestic goals of stable prices and full employment has been a reason that:
A)fixed exchange rates have been replaced with flexible exchange rates.
B)flexible exchange rates have been replaced with fixed exchange rates.
C)countries have tried to stabilize their exchange rates at a high level.
D)countries have tried to stabilize their exchange rates at a low level.

Question

Quizplus · Accepted Answer

Fixed exchange rates limit a government's ability to use monetary policy for domestic goals because the central bank must focus on maintaining the exchange rate. Flexible exchange rates allow governments more freedom to pursue monetary and fiscal policies aimed at achieving stable prices and full employment without worrying about maintaining a specific exchange rate.

The Desire of Governments to Be Able to Use Both