Which of the following holds true for a pegged exchange rate system?
A)Adopting a pegged exchange rate regime increases inflationary pressures in a country.
B)It is necessary for a country whose currency is chosen for the peg to pursue a sound monetary policy.
C)Pegged exchange rates are popular among many of the world's largest and developed nations.
D)The value of a pegged currency falls when the reference currency rises in value.
E)It is similar to a floating exchange rate system rather than a fixed system.

Question

Quizplus · Accepted Answer

Under a pegged exchange rate regime, a country will peg the value of its currency to that of a major currency so that, for example, as the U.S. dollar rises in value, its own currency rises too. For a pegged exchange rate to impose monetary discipline on a country, the country whose currency is chosen for the peg must also pursue sound monetary policy.

Which of the Following Holds True for a Pegged Exchange