Consider an economy with perfect capital mobility, fixed price level and fixed exchange rate. What will be the effect of a rise in foreign interest rate on output of this economy?
Tap an option to check your answer.
4 marks, −1International EconomicsOpen-economy macroeconomicsPolicy under fixed exchange ratesModerateabout 1 min
CUET-PG 2023 Shift 1 Question 39: Open-economy macroeconomics
Answer and worked solution
Checking your account…
Open-economy macroeconomics has come up 55 times in 7 exams since 2006.
What this question tests
This question is on Policy under fixed exchange rates, part of Open-economy macroeconomics in International Economics.
What monetary and fiscal policy can do when the central bank holds the exchange rate.
TestStop has 13 past-paper questions on this subtopic.
Similar questions from other papers
- Which one of the following combinations of simultaneous policy actions is NOT possible?
- Consider the Mundell-Fleming model with flexible exchange rate for a small open economy characterised by a downward sloping IS curve and a vertical LM curve. If the…
- Which of the following is not correct about the effectiveness of monetary and fiscal policies under perfect capital mobility?
- Consider the two scenarios for a small open economy based on the Mundell-Fleming IS-LM model with floating exchange rate and perfect capital mobility Scenario I: Y =…
- Which of the following is/are CORRECT in the case of a small open economy with floating exchange rate? (A) Fiscal expansion raises income. (B) Fiscal expansion leaves…
Question from the CUET-PG 2023 Shift 1 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.