Based on the assignment rule, which of the following is not an appropriate policy response?
A. A country with a fixed exchange rate has high unemployment and a balance of payments surplus. The country should ease both monetary policy and fiscal policy.
B. A country with a fixed exchange rate has high unemployment and a balance of payments deficit. The country should tighten monetary policy and ease fiscal policy.
C. A country with a fixed exchange rate has high levels of inflation and a balance of payments surplus. The country should ease both monetary policy and fiscal policy.
D. A country with a fixed exchange rate has high levels of inflation and a balance of payments deficit. The country should tighten both monetary policy and fiscal policy.
Answer:C
Based on the assignment rule, which of the following is not an appropriate policy response?
A. A country with a fixed exchange rate has high unemployment and a balance of payments surplus. The country should ease both monetary policy and fiscal policy. B. A country with a fixed exchange rate has high unemployment and a balance of payments deficit. The country should tighten monetary policy and ease fiscal policy. C. A country with a fixed exchange rate has high levels of inflation and a balance of payments surplus. The country should ease both monetary policy and fiscal policy. D. A country with a fixed exchange rate has high levels of inflation and a balance of payments deficit. The country should tighten both monetary policy and fiscal policy.