If a Small Country, Such as Argentina, Attempts to Fix

question 31

Multiple Choice

If a small country, such as Argentina, attempts to fix its currency exchange rate with the United States,

• A)its inflation rate must be higher than the U.S.inflation rate.
• B)its interest rates will move together with the U.S.interest rates.
• C)its currency value relative to the U.S.dollar will fluctuate over time.
• D)its central bank will have full flexibility in monetary policy actions.
• E)it must restrict the flow of funds with the United States.

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