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Q. Explain why after, say Norway unilaterally pegs the krone to the euro, domestic money market disturbances will no longer affect domestic output despite the continuation of float-rate regime against non-euro currencies.
Answer: Because Norway's interest rate should equal the euro interest rate any pure shifts in the AA curve will result in immediate reserve outflows or inflows that leave Norway's interest rate unchanged.
Q. Explain why under fixed exchange rate, monetary policy is ineffective whereas under floating exchange rate it is effective in rising output. Answer: In floating by purchasi
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Q. In recent cases, the U.S. placed quotas or protectionist tariffs on imported microchips and imported steel. In both cases the damage to "downstream" industries was obvious to
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