The attempt by many countries to stimulate their domestic economies and to gain access to global financial markets, is causing more and more countries to choose a ________ or ________ exchange rate regime.

Question

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A floating exchange rate regime allows for flexibility in responding to market forces, while a monetary union provides the benefits of a fixed exchange rate without sacrificing control over domestic monetary policy. This combination balances the advantages and disadvantages of both regimes and is becoming increasingly popular among countries. Additionally, full capital controls can limit a country's access to global financial markets and stifle economic growth. Pegged and fixed exchange rate regimes, on the other hand, can lead to imbalances in trade and capital flows and are less flexible in responding to economic shocks.

The Attempt by Many Countries to Stimulate Their Domestic Economies