With high short-term international capital flows,fixed exchange rates,and flexible prices
A)monetary policy is effective
B)fiscal policy is effective
C)both fiscal and monetary policies are effective
D)neither fiscal policy nor monetary policies are effective

Question

Quizplus · Accepted Answer

Under fixed exchange rates and high capital mobility, fiscal policy is effective because it can influence aggregate demand without being offset by exchange rate adjustments. Monetary policy is less effective as it leads to capital flows that counteract its impact.

With High Short-Term International Capital Flows,fixed Exchange Rates,and Flexible Prices