Major Drawbacks of a Fixed Exchange Rate Do NOT Include

question 117

Multiple Choice

Major drawbacks of a fixed exchange rate do NOT include:

• A) exchange controls must be imposed at the cost of administrative red tape and corruption.
• B) resources must be diverted to the accumulation of large foreign exchange reserves.
• C) monetary policy cannot be used to stabilize output and the inflation rate.
• D) commerce among countries is more uncertain and riskier.

---

Definitions:

Foreign Legislation

Laws or regulations that are enacted by a governing body outside of one's own country.

Common Market

A customs union which further allows barrier-free movement of services, workers and finance among member territories.

Opinion Leadership

The ability of an individual to influence the opinions or behaviors of others within a community or group, often due to expertise or social status.

Word-Of-Mouth Activity

The act of consumers providing information to others about products or services verbally or through digital channels, influencing perceptions and decisions.