The country of Banoon faces high inflationary pressures and wants to combat that by adopting a new exchange rate system.What kind of an exchange rate system is recommended for Banoon?

Question

Quizplus · Accepted Answer

A pegged exchange rate system would allow Banoon to control its exchange rate by fixing it to an anchor currency or a basket of currencies. This would help Banoon to combat inflationary pressures by providing greater stability to its currency and limiting fluctuations in prices. Additionally, a pegged exchange rate system would provide greater certainty for investors and promote trade with other countries.

The Country of Banoon Faces High Inflationary Pressures and Wants