Which of the following is not correct about the effectiveness of monetary and fiscal policies under perfect capital mobility? (A) Under the fixed exchange rate, monetary policy is powerless to affect output. (B) Under the fixed exchange rate, the central bank runs an independent monetary policy. (C) Under the fixed exchange rate, fiscal policy is highly effective. (D) Under the floating exchange rate, a monetary expansion leads to currency depreciation, increased exports and increased output.

CUET-PG 2025 Question 16: Open-economy macroeconomics

Which of the following is not correct about the effectiveness of monetary and fiscal policies under perfect capital mobility?

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Open-economy macroeconomics has come up 55 times in 7 exams since 2006.

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.

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