A small economy country whose GDP is heavily dependent on trade with the United States could use a (an)________ exchange rate regime to minimize the risk to their economy that could arise due to unfavorable changes in the exchange rate.

Question

Quizplus · Accepted Answer

A pegged exchange rate with the United States would mean that the country's currency is fixed to the US dollar. This would minimize the risk of unfavorable changes in the exchange rate between the two countries, as it would ensure a stable currency exchange rate for trade purposes.

A Small Economy Country Whose GDP Is Heavily Dependent on Trade