True or False?
The correct answer is False. Under fixed exchange rates, equilibrium output is determined by the intersection of the IS curve and the ZZ line. Since fiscal policy shifts the IS curve it changes equilibrium output. Monetary policy is ineffectual because it does not shift IS. Under flexible exchange rates equilibrium output is determined by the intersection of the LM curve and the ZZ line. Since monetary policy shifts the LM curve it changes equilibrium output. Fiscal policy is impotent because it does not shift LM.