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A country with a hard peg will no longer be able to stave off a recession by implementing an expansionary monetary policy because doing so would lead the country's currency to fall and end the hard peg.
Pegged exchange rates – what are they?
In a fixed exchange rate system, also known as a pegged exchange rate, a currency's value is fixed or pegged by a monetary authority against the value of another currency, a basket of currencies, or another measure of worth, such as gold.
Is expansionary monetary policy helpful in fighting recessions?
Increasing government spending or lowering taxes are two ways that expansionary fiscal policy raises the amount of overall demand. The best time to implement an expansionary fiscal policy is when an economy is in a slump and producing less GDP than it could.
What is the effect of expansionary monetary policy on the economy?
A monetary policy that is expansionary causes an economy's interest rates to rise. A monetary policy that is expansionary causes investment in an economy to decrease. An expansive monetary policy causes the aggregate demand curve to shift to the left.
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