Which of the following is not an advantage to a country of choosing to fix its exchange rate against a major currency, rather than choosing a floating exchange rate?
A) Pegging allows the country more flexibility in conducting monetary policy.
B) Pegging helps avoid inflation in imported goods caused by currency depreciation for countries with significant levels of imports.
C) Pegging insures that interest payments stemming from foreign loans do not fluctuate with the value of the currency.
D) Pegging reduces the uncertainty caused by currency fluctuations and thereby simplifies business planning.
E) Pegging often grants a central bank additional credibility.
Correct Answer:
Verified
Q89: Figure 15.3 Q90: If a country's currency is "pegged" to Q91: Members of the European Union decided to Q92: Figure 15.4 Q93: The central bank of the European Union Unlock this Answer For Free Now! View this answer and more for free by performing one of the following actions Scan the QR code to install the App and get 2 free unlocks Unlock quizzes for free by uploading documents![]()
![]()