Under a credible system of fixed nominal exchange rates... A.The Central Bank can adjust the interest rate as it deems appropriate for smoothing domestic output fluctuations B.Domestic inflation will be approximately equal to the inflation rate of the country to which the domestic currency is pegged C.Public debt can be monetised, i.e. via government bonds bought by the Central Bank against newly created money D.All of these options E.None of these options
Under a credible system of fixed nominal exchange rates... A.The Central Bank can adjust the interest rate as it deems appropriate for smoothing domestic output fluctuations B.Domestic inflation will be approximately equal to the inflation rate of the country to which the domestic currency is pegged C.Public debt can be monetised, i.e. via government bonds bought by the Central Bank against newly created money D.All of these options E.None of these options
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Under a credible system of
fixed nominal exchange
rates...
A.The Central Bank can adjust
the interest rate as it deems
appropriate for smoothing
domestic output
fluctuations
B.Domestic inflation will be
approximately equal to the
inflation rate of the country
to which the domestic
currency is pegged
C.Public debt can be
monetised, i.e. via
government bonds bought
by the Central Bank against
newly created money
D.All of these options
E.None of these options
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