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1. Under a system of fixed exchange rates and high capital mobility, is monetary policy or fiscal policy better suited for stimulating the economy?
A. An expansionary fiscal policy is more effective because the initial and secondary effects of the expansionary fiscal policy reinforce each other, so that real GDP increases by a greater amount than in a closed economy.
B. An expansionary monetary policy is more effective because the initial and secondary effects of the expansionary fiscal policy reinforce each other, so that real GDP increases by a greater amount than in a closed economy.
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