One argument for a fixed exchange rate system is that
A) governments can contract their money supply without worrying about the need to maintain parity.
B) trade balance adjustments do not require the intervention of the International Monetary Fund.
C) it ensures that governments do not expand the monetary supply too rapidly, thus causing high price inflation.
D) speculations in exchange rates boost exports and reduce imports.
E) each country should be allowed to choose its own inflation rate.

Question

Quizplus · Accepted Answer

A fixed exchange rate system can prevent governments from expanding the monetary supply too rapidly, which helps in controlling inflation.

One Argument for a Fixed Exchange Rate System Is That