For a country to successfully maintain a fixed exchange rate value of its currency relative to another currency (for example, as is done when currencies are unified or pegged), it must

Question

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To maintain a fixed exchange rate, a country must give up the independence of its monetary policy. This means that the country cannot independently set interest rates, print money, or manipulate the money supply without also affecting the exchange rate. Rather, the country must align its monetary policy with the country whose currency it is pegging to.

For a Country to Successfully Maintain a Fixed Exchange Rate