Consider two countries that trade with each other, called X and Y. According to the text, inflation in Country X will have a greater impact on inflation in Country Y under the ____ system. Now, consider two other countries that trade with each other, called A and B. Unemployment in Country A will have a greater impact on unemployment in Country B under the ____ system.

Question

​Consider two countries that trade with each other, called X and Y. According to the text, inflation in Country X will have a greater impact on inflation in Country Y under the ____ system. Now, consider two other countries that trade with each other, called A and B. Unemployment in Country A will have a greater impact on unemployment in Country B under the ____ system.

Quizplus · Accepted Answer

Under a fixed exchange rate system, inflation and unemployment can more easily transmit between countries due to the pegged nature of their currencies, which limits the ability of exchange rates to adjust in response to changing economic conditions. This can lead to more synchronized economic cycles between the countries.

​Consider Two Countries That Trade with Each Other, Called X

Consider Two Countries That Trade with Each Other, Called X