Under fixed rates, which one of the following statements is the most accurate?
A) Monetary policy can affect only output.
B) Monetary policy can affect only employment.
C) Monetary policy can affect only international reserves.
D) Monetary policy can not affect international reserves.
E) Monetary policy can only affect money supply.

Question

Quizplus · Accepted Answer

Under fixed exchange rates, monetary policy primarily affects international reserves as the central bank must buy or sell foreign currency to maintain the fixed rate, impacting its reserves.

Under Fixed Rates, Which One of the Following Statements Is