One argument favouring a fixed-exchange-rate system is that it:
A)allows monetary policy to be used for stabilizing output and prices.
B)reduces exchange-rate uncertainty, thereby promoting more international trade.
C)leads to excessive growth of the money supply.
D)requires no actions on the part of the central bank to implement.

Question

Quizplus · Accepted Answer

A fixed-exchange-rate system reduces exchange-rate uncertainty, which can promote more international trade by providing stability and predictability in international transactions.

One Argument Favouring a Fixed-Exchange-Rate System Is That It