10 1. If the government attempts to stimulate theeconomy under a fixed-rate regime, it must alsoconduct a parallel expansionary monetarypolicy. Why? And what impact would there beon the domestic economy?2. Describe the effect of a permanent increase inthe foreign quantity of money on exchangerates in both the short run and long run?

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Business

Economics

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Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter6: Managing In The Global Economy

Section: Chapter Questions

Problem 4E

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Question

1. If the government attempts to stimulate the
economy under a fixed-rate regime, it must also
conduct a parallel expansionary monetary
policy. Why? And what impact would there be
on the domestic economy?
2. Describe the effect of a permanent increase in
the foreign quantity of money on exchange
rates in both the short run and long run?

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