An Advantage of Fixed Exchange Rates for a Country That

question 108

Multiple Choice

An advantage of fixed exchange rates for a country that suffers from bouts of high inflation is:

• A) it makes imports less expensive.
• B) it establishes a credible low inflation policy.
• C) it unties policymakers' hands so they can alter the reserves of the banking system as needed.
• D) policymakers will have increased control over domestic interest rates.

---

Definitions:

Crust Thicken

Crust thickening refers to the increase in the Earth's crust's depth due to geologic processes, such as the accumulation and compression of sediments or the intrusion of igneous rock.

Continental Collision

The process where two continental plates collide, leading to the formation of mountain ranges.

Thickness of Continental Crust

The measurement of how thick the layer of rocks and sediments making up the continents is, varying from 20 to 70 kilometers.

Magmas

Molten rock stored beneath the Earth's surface, which may cool to form igneous rock or erupt as lava during volcanic activities.