Comparing monetary and fiscal policy under fixed and floating exchange rate regimes, which of the following statements is false?

A. In a floating exchange rate regime, an expansionary monetary policy is effective by stimulating spending and by depreciating the currency.

B. In a floating exchange rate regime, an expansionary fiscal policy is effective by stimulating spending, though there may be crowding-out effects due to higher rates of interest and currency appreciation.

C. In a fixed exchange rate regime, an expansionary monetary policy is effective by stimulating spending; it has no impact on the currency value or trade balance.

D. In a fixed exchange rate regime, an expansionary fiscal policy is effective by stimulating spending, as long as the parallel expansionary monetary policy keeps exchange rates stable.

Explain your answer.

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answer is C In a fixed exchange rate regime an expansionary monetary ... View the full answer