How are interest rates typically affected by a strict currency board system?
A) Interest rates adjust automatically based on the supply and demand of domestic currency.
B) Developing countries receive lower interest rates.
C) Interest rates are based on the gold standard and remain steady.
D) Developed countries are required to pay higher interest rates.
E) The government is allowed to print money when necessary and charge interest for its use.

Question

Quizplus · Accepted Answer

In a strict currency board system, interest rates adjust automatically based on the supply and demand of the domestic currency, as the currency board maintains a fixed exchange rate with a foreign currency and cannot independently set interest rates.

How Are Interest Rates Typically Affected by a Strict Currency