A cooperative outcome in a situation where one nation pegs to another would be that the:
A) center country abandons its own stabilization policy in favor of the home country.
B) home country absorbs the losses resulting from the stabilization policy in the center country.
C) center country makes concessions, recognizing the impact on the home country, thereby sharing the pain.
D) peg is temporarily abandoned.

Question

Quizplus · Accepted Answer

In a situation where one nation pegs to another, a cooperative outcome would involve the center country making concessions and recognizing the impact on the home country, thereby sharing the pain. This approach ensures that both countries bear the burden of any potential losses resulting from the stabilization policy. Abandoning the peg or abandoning the center country's own stabilization policy would not be a cooperative outcome, as it would place all the burden on one country. Similarly, the home country absorbing the losses resulting from the stabilization policy would also not be a cooperative outcome, as it would place an undue burden on the home country.

A Cooperative Outcome in a Situation Where One Nation Pegs