Which system is the most difficult to maintain if you are running a trade deficit?

Question

Quizplus · Accepted Answer

In a fixed exchange rate system, the central bank is obligated to maintain a stable exchange rate by buying and selling its own currency on the foreign exchange market. If the country is running a trade deficit, it will lead to a decrease in foreign reserves and ultimately force the central bank to devalue its currency to maintain the fixed exchange rate. This devaluation can trigger inflation and potentially create political and economic instability. Therefore, maintaining a fixed exchange rate in the face of a trade deficit can be challenging and difficult.

Which System Is the Most Difficult to Maintain If You