If a Country Has a Fixed Exchange Rate

question 24

Multiple Choice

If a country has a fixed exchange rate,

• A)it will have a more stable economy.
• B)it will have lower inflation.
• C)it will have higher inflation.
• D)it will have fixed interest rates.
• E)it cannot use monetary policy to control inflation.

---

Definitions:

Revolving Credit Agreement

A Revolving Credit Agreement is a financial arrangement which allows the borrower to withdraw, repay, and redraw loans repeatedly up to a certain credit limit.

Commitment Fee

A fee charged by a lender to a borrower for an agreed-upon loan or line of credit that has not yet been utilized.

Self-Liquidating Debt

A type of short-term loan that is used to finance a project or inventory that will generate enough income to pay back the loan.

Spontaneous Financing

Financing that arises naturally from the normal operation of a business, such as trade credit from suppliers.