Which Statement Is NOT True of a Fixed Exchange Rate

question 111

Multiple Choice

Which statement is NOT true of a fixed exchange rate system?

• A) It is good for business.
• B) Foreign exchange reserves are costly.
• C) It keeps a country from using inflationary policies.
• D) It makes pursuing domestic macroeconomic objectives easier.

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Definitions:

Compound Interest

Interest calculation that encompasses both the initial principal and the cumulative interest that has accrued in preceding periods on a deposit or loan.

Simple Interest

A way of calculating interest where the interest charge is based on the original principal amount alone.

Compounded Annually

A method of calculating interest where the interest amount is added to the principal sum at the end of each year, affecting the total interest for the next year.

Interest on Interest

The compound interest that is calculated not only on the initial principal but also on the accumulated interest of previous periods.