Which of the following would happen to interest rates under a strict currency board system?
A)They adjust automatically.
B)They will be controlled by the government.
C)They will usually remain high.
D)They will usually remain low.

Question

Quizplus · Accepted Answer

Under a strict currency board system,interest rates adjust automatically.If investors want to switch out of domestic currency into,for example,U.S.dollars,the supply of domestic currency will shrink.This will cause interest rates to rise until it eventually becomes attractive for investors to hold the local currency again.

Which of the Following Would Happen to Interest Rates Under