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Q. "A monetary policy is not a policy tool under fixed exchange rates." Discuss.
Answer: It is True Under fixed exchange rates domestic asset transactions by the central bank is able to be used to alter the level of foreign reserves but not to influence the state of employment and output.
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Q. Use the II - XX framework in order to show graphically how inflation can be imported from abroad unless exchange rates are adjusted. Answer: Suppose that the home economy is
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