Suppose a Country Switches from a Flexible to a Fixed

Multiple Choice

Suppose a country switches from a flexible to a fixed exchange rate. Which of the following will occur as a result of this change?

A) Both fiscal and monetary policy will become more effective in changing GDP.
B) A given change in government spending will now have a greater effect on output.
C) Both fiscal and monetary policy will become completely ineffective in changing GDP.
D) Monetary policy will become a more effective tool for changing output.
E) A given change in government spending will now have a smaller effect on output.