Which of the Following Is True of a fiXed Exchange

question 42

Multiple Choice

Which of the following is true of a fixed exchange rate regime?

• A) It allows gradual adjustments in the value of the exchange rate.
• B) It increases the volatility of the nominal exchange rate.
• C) It ensures that governments follow financial discipline.
• D) It prevents speculative attacks on the domestic currency.

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Definitions:

Monopoly

A firm that is the sole seller of a product without any close substitutes.

Game Theory

The study of how people behave in strategic situations

Competitive Markets

Markets in which there are many buyers and sellers so that each has a negligible impact on the market price of goods and services.

Monopoly Markets

Markets in which a single seller dominates, with no viable competition, often leading to higher prices for consumers.