Under which one of the following would a country that followed policies leading to a lower inflation rate than that experienced by its trading partners would come under pressure to expand its money supply?
A)fixed-rate currency system
B)freely-floating currency system
C)managed float
D)currency board

Question

Quizplus · Accepted Answer

In a fixed-rate currency system, a country that experiences lower inflation than its trading partners will see its currency appreciate in real terms, making its exports more expensive and imports cheaper. This can lead to a trade deficit and pressure on the country to expand its money supply to maintain the fixed exchange rate.

Under Which One of the Following Would a Country That