Question

“If a country wants to keep its exchange rate from changing, it must give up some control over its monetary policy.” Is this statement true, false, or uncertain? Explain your answer.

Short answer

The given statement "If a country wants to keep its exchange rate from changing, it must give up some control over its monetary policy" is true.

Step-by-step solution

Concept Introduction

Monetary policy refers to the macroeconomic policy that's laid by the financial institution of every country. it's the policy taken by the financial institution to manage the charge per unit, rate, rate of inflation through pecuniary resource in an economy.

Explanation of Solution

The given statement "If a country wants to keep its exchange rate from changing, it must give up some control over its monetary policy" is true.
Under a fixed rate of the exchange system, the rate of exchange will be the focus of the monetary controls.
If a country were to pursue money growth or changes to the inflation rate, it would disrupt the fixed exchange rate, therefore some monetary policies can't be enacted at the same time.