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Pegging a Country's Exchange Rate to a Major Currency Can

Question 166

Multiple Choice

Pegging a country's exchange rate to a major currency can be advantageous in all of the following situations, except


A) if the country has extensive trade with the home of the major currency.
B) if investors believe the major currency to be more stable than the domestic country's currency.
C) if a country wishes to conduct independent monetary policy.
D) if imports are a significant fraction of the goods the country's consumers buy.
E) if potential foreign investors are deterred by potential changes in the currency's value.

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