A country has a fixed exchange rate and capital is very mobile.  Because it is experiencing high unemployment, the central bank increases the money supply.  Using symbols and words, explain what will happen to (a) internal balance; (b) external balance; (c) the country’s exchange rate.    How must the central bank respond if it wishes to maintain the fixed exchange rate?  Why is monetary policy said to be ineffective with fixed exchange rates and capital mobility?

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Unemployment and Cost of Unemployment

Unemployment is the state of being unemployed, even when an individual is actively seeking work opportunities. The unemployment rate refers to the percentage of the workforce that is currently unemployed.