If the Bank of Canada Maintains a Fixed Exchange Rate

Multiple Choice

If the Bank of Canada maintains a fixed exchange rate, which of the following effects will an expansionary fiscal policy have?

A) It will cause a large and permanent rightward shift in the AD curve.
B) It will cause a large and permanent leftward shift in the AD curve.
C) It will have no permanent effect on the position of the AD curve, but it will cause interest rates to rise.
D) It will have no permanent effect on either the position of the AD curve or the interest rate.