Countries who maintain fixed exchange rates with each other are likely to more frequently employ countercyclical fiscal policy.

Question

Quizplus · Accepted Answer

Countries with fixed exchange rates are more vulnerable to external economic shocks, and countercyclical fiscal policy can help mitigate the impact of these shocks on their economies. By coordinating fiscal policies, such countries can better respond to changes in economic conditions and maintain stability in their exchange rates.

Countries Who Maintain Fixed Exchange Rates with Each Other Are