A country with fixed exchange rates oFten faces constraints on growth.

Question

Quizplus · Accepted Answer

When a country has a fixed exchange rate, the central bank must intervene in the foreign exchange market to maintain the value of the currency within a specified range. This can restrict the ability of a country to pursue monetary policies that could boost growth, as interest rates and money supply may not be able to be adjusted independently. Additionally, a fixed exchange rate can make a country's exports less competitive, potentially hindering trade and economic growth.

A Country with Fixed Exchange Rates OFten Faces Constraints on Growth