Author Question: A country that joins an exchange rate area A) gives up its ability to use the exchange rate for ... (Read 106 times)

DelorasTo · **on:** Jun 30, 2018

A country that joins an exchange rate area

A) gives up its ability to use the exchange rate for the purpose of stabilizing output and employment.
B) does not give up its ability to use the exchange rate and monetary policy for the purpose of stabilizing output and employment.
C) gives up its ability to use the exchange rate and monetary policy for the purpose of stabilizing output and employment.
D) gives up its ability to use only monetary policy for the purpose of stabilizing output and employment.
E) does not gives up its ability to use only monetary policy for the purpose of stabilizing output and employment.

Question 2

Even under flexible exchange rate regime, governments could not be indifferent to the behavior of exchange rates and inevitably surrendered some of their policy autonomy in other areas to prevent exchange rate movements they viewed as harmful to

their economies. Discuss.

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

Answer to Question 1

C

Answer to Question 2

True. One example is Volcker in October 1979 decreasing the U.S. money supply to halt further weakening of the dollar.