A country might decide to switch from flexible to fixed exchange rates:
A) to increase competitiveness with its trading partners.
B) to increase the effectiveness of domestic monetary policy.
C) to offset exchange rate fluctuations.
D) to reduce the effects of external shocks on the domestic economy.

Question

Quizplus · Accepted Answer

A fixed exchange rate regime helps stabilize exchange rates, which can reduce uncertainty and volatility stemming from fluctuations in the exchange rate.

A Country Might Decide to Switch from Flexible to Fixed