For this question,assume that policy makers are pursuing a fixed exchange rate regime.Now suppose that households decide to increase consumption because of,for example,an increase in consumer confidence.Given this information,we would expect which of the following to occur?
A)an increase in the domestic interest rate
B)a reduction in E
C)an increase in E
D)an increase in investment
E) none of the above

Question

Quizplus · Accepted Answer

In a fixed exchange rate regime, an increase in consumption can lead to higher aggregate demand, which may boost economic activity and encourage investment.

For This Question,assume That Policy Makers Are Pursuing a Fixed