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dangina [55]
1 year ago
15

under flexible exchange rates, monetary policy has impacts on the domestic economy while fiscal policy has weaker impacts, as co

mpared to in a closed economy
Business
1 answer:
Rom4ik [11]1 year ago
5 0

It works through the relationship between interest rates and exchange rates in the transmission mechanism and through the relationship between interest rates in closed economies. On the other hand the impact of fiscal policy on aggregate demand has weakened.

Flexible exchange rate monetary policy has a strong ability to change AD.The exchange rate flow does not require central banks to hold large amounts of foreign exchange reserves to maintain exchange rates. Subsidies can therefore be used to stimulate economic growth through the accumulation of capital goods.

Fiscal policy affects aggregate demand through changes in administrative spending and taxes. These factors affect work and family life which in turn affect spending and investment. Monetary policy affects the money supply in the economy which affects interest rates and growth

Learn more about flexible exchange rates brainly.com/question/24280716

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