Exchange rates will be less variable if countries manage to converge their economies.

Question

Quizplus · Accepted Answer

When countries converge their economies, meaning they achieve similar levels of inflation, interest rates, and economic growth, their currencies tend to be more stable relative to each other. This reduces the variability in exchange rates because the fundamental economic conditions that often lead to exchange rate fluctuations are more aligned.

Exchange Rates Will Be Less Variable If Countries Manage to Converge