The Republic of Manoonistan recently moved to a pegged exchange rate system.Which of the following holds true for the Republic of Manoonistan's pegged exchange rate system?
A) Adopting a pegged exchange rate regime increases inflationary pressures in the Republic of Manoonistan.
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.
Correct Answer:
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