III.True or False$/$Explain $(21$ points, $7$ points each$)[$T$/$F $1$

point, explanation $6$ points$]$

Under a fixed exchange rate, fiscal tools are powerless to affect the

economy's money supply or its output.

If PPP holds true, then the law of one price holds true for every

commodity as long as the reference baskets used to reckon different

countries' price levels are the same.

If central banks are not sterilizing and the home country has a balance of

payments shortage, any associated decrease in the home central bank's

foreign asset implies an increased home money supply.