Which of the following is true?
A)Countries that want to have a fixed exchange-rate regime should be willing to refrain from policy changes that lead to large international capital flows.
B)For a floating exchange-rate to work for a country, it cannot have an inflation rate that is much above the inflation rate(s) of its primary trading partners.
C)Fixed exchange-rates encourage countries to have different goals, priorities and policies with respect to macroeconomic variables.
D)If capital is highly mobile, fiscal policy then loses its effectiveness under a fixed exchange rate.

Question

Quizplus · Accepted Answer

Countries with fixed exchange-rate regimes need to maintain stable economic policies to avoid large capital flows that can destabilize the fixed rate.

Which of the Following Is True