Assume That the Economy Is Operating in a Fixed Exchange

Multiple Choice

Assume that the economy is operating in a fixed exchange rate regime and that perfect capital mobility exists. Given this information, which of the following will occur?

A) The central bank cannot use monetary policy independently to affect domestic output.
B) Contractionary fiscal policy will require the central bank to decrease the money supply.
C) The domestic and foreign interest rates must be equal.
D) All of the above.
E) None of the above.