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:

Bowens Reaction Series

Bowen's Reaction Series describes the sequence in which minerals crystallize from cooling magma according to their chemical composition and temperature.

Crystallize

The process by which a solid forms, where the atoms or molecules are highly structured in a pattern known as a crystal lattice.

Olivine

A green iron-magnesium silicate mineral that composes much of the upper mantle and also occurs in mafic and ultramafic igneous rocks.

Plagioclase

A very common rock-forming feldspar mineral that contains sodium, calcium, or both elements.