497) Suppose a country has a floating exchange rate and no capital controls. It also has a recessionary gap. It tackles this with an expansionary monetary policy. In the final equilibrium people expect its exchange rate to stay at its new value. Which of the fo
Answer is:
The exchange rate must end up at its initial value.
Related Micro Economics MCQ (GK Set-1) with Answers
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Output will end up higher than it was initially.
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In the event of a demand shock, fiscal policy is powerless to offset the change in demand
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