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.

Question

Quizplus · Accepted Answer

In a fixed exchange rate system, governments do need to constantly intervene in the foreign exchange market to maintain exchange rates within specified boundaries. This is because the government sets a specific exchange rate and must take action to buy or sell currency to maintain that rate.

An Advantage of a Fixed Exchange Rate System Is That