Explain why, when assuming imperfect competition with non-homogenous goods and unemployment, the monetary policy is efficient in the case of flexible exchange rate and fully inefficient when exchange rates are fixed.

Explain why, when assuming imperfect competition with non-homogenous goods and unemployment, the monetary policy is efficient in the case of flexible exchange rate and fully inefficient when exchange rates are fixed.

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter22: International Finance

Section: Chapter Questions

Problem 6QP

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Question

Explain why, when assuming imperfect competition with non-homogenous goods and unemployment, the monetary
policy is efficient in the case of flexible exchange rate and fully inefficient when exchange rates are fixed.

Give proper explanation.thank you

Definition Definition State in which an individual is without work, despite actively seeking employment opportunities. The unemployment rate refers to the percentage of the workforce that is currently unemployed. Unemployment is one of the key indicators of the conditions prevailing in an economy. It is therefore considered a barometer that points out the condition of an economy.

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