Compare the impact of monetary policy under fixed exchange rates with those under flexible exchange rates.

Impact of monetary policy under fixed exchange rates has lived under many guises  but however it may appear, it generally boils down to adjusting the supply of money in the economy to achieve some combination of inflation and output stabilization.

Most economists would agree that in the long run, output—usually measured by gross domestic product (GDP)—is fixed, so any changes in the money supply only cause prices to change. But in the short run, because prices and wages usually do not adjust immediately, changes in the money supply can affect the actual production of goods and services. This is why monetary policy—generally conducted by central banks such as the U.S. Federal Reserve (Fed) or the European Central Bank (ECB)—is a ____ ____ ___ ________ _____ ______ _______.
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