Multiple Choice
In a freely floating exchange rate system, exchange rates tend to overshoot after a monetary contraction, since
A) interest rates adjust immediately but exchange rates and prices adjust only gradually
B) prices and interest rates adjust immediately but exchange rates adjust only gradually
C) exchange rates adjust immediately but prices adjust only gradually
D) the gain in competitiveness causes a temporary increase in output
E) none of the above
Correct Answer:
Verified
Correct Answer:
Verified
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