The Strongest Argument in Favor of Fixed Exchange-Rates Is

question 34

Multiple Choice

The strongest argument in favor of fixed exchange-rates is:

• A)the country's ability to use independent monetary policy to pursue internal balance.
• B)that floating exchange rates are often very volatile, disrupting international trade.
• C)the ease of defending fixed exchange rates during speculative attacks.
• D)that a fixed exchange rate allows unrestricted flow of financial capital from and into a country.

---

Definitions:

Post World War II

The period after the end of World War II, generally considered to have started in 1945, marked by significant social, political, and economic changes globally.

Stagflation

A condition of slow economic growth and relatively high unemployment accompanied by rising prices, or inflation.

Real GDP

Gross Domestic Product adjusted for inflation, representing the value of all goods and services produced over a specific time period in real terms.

Inflation Rates

The percentage rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.