If a Country Fixes the Exchange-Rate Value of Its Currency

question 126

Multiple Choice

If a country fixes the exchange-rate value of its currency, it will have to

• A) follow a highly expansionary monetary policy in order to maintain the convertibility of its currency.
• B) give up its monetary independence in order to maintain the convertibility of its currency.
• C) fix its domestic interest rates in order to maintain the convertibility of its currency.
• D) raise taxes in order to maintain the convertibility of its currency.

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