If a Country's Central Bank Seeks to Stabilize the Price

Multiple Choice

If a country's central bank seeks to stabilize the price level and if nominal shocks from abroad are important, then

A) a flexible exchange rate is preferable to a fixed exchange rate.
B) flexible and fixed exchange rates are equivalent.
C) the central bank will not be able to realize its goal.
D) a fixed exchange rate is preferable to a flexible exchange rate.
E) the central bank should devalue under fixed exchange rates.