The European Monetary System

Question

Quizplus · Accepted Answer

The European Monetary System required members to keep their exchange rates within a narrow band around the German currency. While it did not directly cause inflation, it did limit the ability of member countries to combat inflation through exchange rate adjustments. Additionally, it did not give a competitive trade advantage to countries with high inflation rates, as they would be forced to devalue their currency to maintain the band, making their exports more expensive.