A fixed exchange rate: I. leaves monetary policy available for domestic stabilization.
II) reduces the uncertainty of international trade.

Question

Quizplus · Accepted Answer

II only - A fixed exchange rate reduces the uncertainty associated with international trade by providing stability in exchange rates, which helps businesses and investors make more informed decisions regarding international transactions. However, it limits a country's ability to use monetary policy for domestic stabilization because the central bank must focus on maintaining the fixed exchange rate.

A Fixed Exchange Rate: I