Fixed exchange rates allow countries to formulate their economic policies independently of other nations.

Question

Quizplus · Accepted Answer

Fixed exchange rates restrict the ability of countries to formulate their economic policies independently. This is because any changes in the monetary policy of one country will also affect the exchange rate of other countries that are tied to it. This limits the leeway that countries have to pursue their own domestic policies.

Fixed Exchange Rates Allow Countries to Formulate Their Economic Policies