Under the flexible exchange rate, lowering the price of a foreign ...

[tth]

Under the flexible exchange rate, lowering the price of a foreign currency will
 
  A) allow the expansion of monetary policy without causing inflation.
  B) decrease the foreign country's output.
  C) prevent a foreign price increase from causing deflation at home.
  D) cause a home price increase to be exported to the foreign markets.
  E) cause a beggar-thy-neighbor effect.

Question 2

Under the fixed rate regime foreign countries could hold their dollar exchange rates constant by
 
  A) using tight monetary policy.
  B) using expansionary fiscal policy.
  C) negotiating with the central bank of the United States.
  D) setting their domestic interest rate equal to the U.S. interest rate.
  E) holding their exchange rates constantly pegged to the euro and yen.

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Answer to Question 1

A

Answer to Question 2

D

[tth]

Excellent

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