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Why Might a Central Bank Oppose a Country Moving to a Fixed

Question 24

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Why might a central bank oppose a country moving to a fixed exchange rate?


A) Fixed exchange rates limit the ability of central banks to change interest rates to affect the domestic economy.
B) Fixed exchange rates often lead to higher inflation,which central banks tend to oppose.
C) Fixed exchange rates force central banks to hold more foreign currency reserves than they would prefer.
D) Fixed exchange rates increase the risk of private bank failures,which the central bank would need to bail out.

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