If Bulgaria, for instance, wished to keep its exchange rate with the dollar fixed, what monetary policy options are available to lower unemployment in the short run?
a. Bulgaria has all the options available to it, because domestic monetary policy is conducted inside the nation and has no bearing on its international variables.
b. Traders would realize that any monetary policy actions taken inside a nation would improve economic conditions without affecting international variables.
c. Bulgaria cannot use any monetary policy that would cause its short-run exchange rate to depreciate against the dollar.
d. Bulgaria's monetary action would restore confidence and help keep its currency stable.
Ans: c. Bulgaria cannot use any monetary policy that would cause its short-run exchange rate to depreciate against the dollar.
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