Author Question: To what extent can monetary policy be used to affect output in a fixed exchange rate regime? ... (Read 43 times)

sheilaspns · **on:** Jun 30, 2018

To what extent can monetary policy be used to affect output in a fixed exchange rate regime? Explain.

What will be an ideal response?

Question 2

In the absence of technological progress, an increase in the saving rate will cause which of the following?

A) increase temporarily the growth of output per worker
B) increase the steady state growth of output per worker
C) decrease temporarily the growth of output per worker
D) decrease the steady state growth of output per worker
E) have an ambiguous effect on the growth of output per worker

Dominic · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

It cannot. To peg the exchange rate, the central bank must keep the domestic interest rate equal to the exogenous foreign interest rate. The domestic central bank cannot independently change its interest rate.

Answer to Question 2

A