Exchange controls plus high inflation tends to produce:
A) sterilization.
B) intervention.
C) an undervalued exchange rate.
D) a black market in foreign exchange.
E) none of the above

Question

Quizplus · Accepted Answer

Exchange controls and high inflation create a situation where obtaining foreign exchange legally becomes difficult and expensive due to strict government regulations and a devalued currency. As a result, a black market for foreign exchange typically develops, where people can buy and sell currency at higher rates than the official exchange rate.

Exchange Controls Plus High Inflation Tends to Produce