An advantage of a fixed exchange rate system is that governments are not required to constantly intervene in the foreign exchange market to maintain exchange rates within specified boundaries.

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Governments are actually required to constantly intervene in the foreign exchange market to maintain exchange rates within specified boundaries in a fixed exchange rate system. If the exchange rate deviates too much from the fixed rate, the government must buy or sell foreign currency to bring it back in line.

An Advantage of a Fixed Exchange Rate System Is That