In the Mundell-Fleming model under perfect capital mobility and floating exchange rates, monetary policy is: MCQ with Answer and Explanation

In the Mundell-Fleming model under perfect capital mobility and floating exchange rates, monetary policy is:
A. Completely neutral
B. Highly effective in influencing output
C. Ineffective in influencing output
D. Effective only in the long run
Answer: Option B
Solution (By JKSSB Mock Tests)
Under perfect capital mobility and floating exchange rates, an expansionary monetary policy lowers interest rates, causes capital outflow and currency depreciation, which boosts net exports and output, making monetary policy highly effective.

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Practice More Economy Set 1 Questions

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The 'National Pension System' in India is regulated by:
A. SEBI
B. PFRDA
C. IRDAI
D. RBI

Correct Answer: Option B


Explanation:
The National Pension System is regulated by the Pension Fund Regulatory and Development Authority.

This question belongs to: Economy GK Economy Set 1
Question #2
The 'Yojana Aayog' is the Hindi name for:
A. Finance Commission
B. Planning Commission
C. GST Council
D. NITI Aayog

Correct Answer: Option B


Explanation:
The Planning Commission was known as Yojana Aayog in Hindi.

This question belongs to: Economy GK Economy Set 1
Question #3
The 'trade facilitation agreement' of the WTO aims to:
A. ban exports
B. restrict foreign investment
C. simplify and harmonize customs procedures
D. increase tariffs

Correct Answer: Option C


Explanation:
The Trade Facilitation Agreement aims to simplify customs procedures and ease trade.

This question belongs to: Economy GK Economy Set 1