Twin Cities Business Daily

Whats true of fixed exchange rates if the central bank uses monetary policy to fix the exchange rate?

A. All these choices are true. B. A fixed exchange rate magnifies the ability of monetary policy to stabilize the domestic economy. C. With a fixed exchange rate, net exports always tend to equal zero. D. Because the central bank is responsible for maintaining the fixed exchange rate, it is not free to use monetary policy to stabilize the domestic economy.

Public Comments

1. "D" is right one.