D Rationale: Exchange rates are a target of monetary policy: government policy on the money
supply, the monetary system interest rates, exchange rates and the availability of credit. Fiscal
policy is government policy on the three other options.
Pitfalls: This whole syllabus area is full of fine distinctions in terminology, which lend themselves
to testing in a Multiple Choice and Objective Testing format.
Ways in: If you knew that there was a distinction between fiscal and monetary policy, you might
have identified exchange rates as the only monetary issue.