Advocates of flexible exchange rates claim that under flexible exchange rates
A) enhanced control over fiscal policy would allow countries to dismantle their distorting barriers to international payments.
B) reduced control over monetary policy would allow countries to dismantle their distorting barriers to international payments.
C) enhanced control over monetary policy would allow countries to increase their distorting barriers to international payments.
D) enhanced control over monetary policy would allow countries to dismantle their distorting barriers to international payments.
E) enhanced control over monetary policy would destabilize exchange rates.
Question 2
Advocates of flexible exchange rates claim that under flexible exchange rates, the central bank of
A) an overheated economy could cool down activity by increasing the money supply without worrying that undesired reserve inflow would undermine its stabilization effort.
B) a cooled economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort.
C) an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort.
D) an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve outflow would undermine its stabilization effort.
E) an overheated economy could cool down activity by decreasing employment and increasing output without worrying that this would undermine its stabilization effort.
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