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Q5: In the Mundell-Fleming model, what is the impact of an independent monetary policy under a fixed exchange rate regime?
  • a)
    It leads to changes in the balance of payments.
  • b)
    It causes shifts in the IS curve.
  • c)
    It results in changes in fiscal policy.
  • d)
    It is ineffective due to capital flows and exchange rate adjustments.
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
Q5: In the Mundell-Fleming model, what is the impact of an independent...
In the Mundell-Fleming model under a fixed exchange rate regime, an independent monetary policy is ineffective due to the perfect capital mobility. Even a slight deviation in interest rates would trigger massive capital flows and exchange rate adjustments, nullifying the impact of the monetary policy. This is because the Central Bank must intervene to maintain the fixed exchange rate.
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Q5: In the Mundell-Fleming model, what is the impact of an independent monetary policy under a fixed exchange rate regime?a)It leads to changes in the balance of payments.b)It causes shifts in the IS curve.c)It results in changes in fiscal policy.d)It is ineffective due to capital flows and exchange rate adjustments.Correct answer is option 'D'. Can you explain this answer?
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Q5: In the Mundell-Fleming model, what is the impact of an independent monetary policy under a fixed exchange rate regime?a)It leads to changes in the balance of payments.b)It causes shifts in the IS curve.c)It results in changes in fiscal policy.d)It is ineffective due to capital flows and exchange rate adjustments.Correct answer is option 'D'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Q5: In the Mundell-Fleming model, what is the impact of an independent monetary policy under a fixed exchange rate regime?a)It leads to changes in the balance of payments.b)It causes shifts in the IS curve.c)It results in changes in fiscal policy.d)It is ineffective due to capital flows and exchange rate adjustments.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Q5: In the Mundell-Fleming model, what is the impact of an independent monetary policy under a fixed exchange rate regime?a)It leads to changes in the balance of payments.b)It causes shifts in the IS curve.c)It results in changes in fiscal policy.d)It is ineffective due to capital flows and exchange rate adjustments.Correct answer is option 'D'. Can you explain this answer?.
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