A fixed exchange rate regime imposes discipline in two ways: (1)the need to maintain a fixed exchange rate puts a brake on competitive devaluations and brings stability to the world trade environment and (2)a fixed exchange rate regime imposes what?
A) social discipline on countries, thereby increasing the standard of living
B) economic discipline on countries, thereby increasing gross national product
C) political discipline on countries, thereby curtailing global opportunism
D) monetary discipline on countries, thereby curtailing price inflation
E) currency stability, thereby curtailing trade wars

Question

Quizplus · Accepted Answer

A fixed exchange rate regime imposes monetary discipline on countries by limiting their ability to print money and inflate their currency. This helps to curb price inflation and maintain the value of the currency, which is important for international trade and investment.

A Fixed Exchange Rate Regime Imposes Discipline in Two Ways