Of the systems listed below, the exchange rate system in which a country's ability to
Conduct independent monetary policy is most limited is the

Question

Quizplus · Accepted Answer

In a currency board exchange rate system, a country's monetary policy is tied to the exchange rate of its currency with a foreign currency, typically the US dollar or the euro. The central bank of the country operates as a currency board, which means it has a fixed exchange rate, and holds a reserve of foreign currency equal to the domestic money supply. This limits the ability of the central bank to conduct independent monetary policy, as they cannot change interest rates or adjust the money supply without affecting the exchange rate. Therefore, the correct choice is D.

Of the Systems Listed Below, the Exchange Rate System in Which