One Disadvantage of a Fixed Exchange Rate System Compared to a Floating

question 9

Multiple Choice

One disadvantage of a fixed exchange rate system compared to a floating or managed float exchange rate system is

• A) it is more difficult for central banks to control inflation with a fixed exchange rate system.
• B) a fixed exchange rate system does not allow for government intervention.
• C) a fixed exchange rate system can worsen inflation if domestic prices of imports rise quickly.
• D) a fixed exchange rate system eliminates the possibility of depreciation during a recession.

---

Definitions:

Domain-general Goals

Objectives or aims that are not specific to a particular field or discipline but are applicable across multiple contexts and situations.

Domain-general Adaptations

Cognitive processes or mechanisms that can be applied to a wide range of different tasks and environments, not specialized for any particular domain.

Social Tendencies

Behavioral patterns that are prevalent within societies, such as conformity, aggression, or altruism.

Instincts

Innate, typically fixed patterns of behavior in animals in response to certain stimuli.