Fixed exchange rates are exposed to sudden devaluations or revaluations.

Name: Fixed exchange rates are exposed to sudden devaluations or revaluations.
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Question

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Fixed exchange rates are set by governments or central banks and are not allowed to fluctuate based on market demand and supply. Therefore, if there is a sudden change in economic conditions, such as a decrease in exports or an increase in inflation, the fixed exchange rate system may become vulnerable to sudden devaluations or revaluations.

Fixed Exchange Rates Are Exposed to Sudden Devaluations or Revaluations