The Biggest Disadvantage of a Fixed Exchange Rate Is the

question 36

Multiple Choice

The biggest disadvantage of a fixed exchange rate is the

• A)increased probability of high inflation.
• B)tradeoff between supporting the exchange rate and adjusting the trade balance.
• C)tradeoff between supporting the exchange rate and maintaining economic growth.
• D)increased probability of a trade deficit.
• E)tradeoff between supporting the exchange rate and maintaining a balanced budget.

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Definitions:

Common Stock

Shares representing ownership in a company, providing voting rights and potential dividends to shareholders.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and stockholders' equity at a specific point in time.

Equity Method

An accounting technique used by companies to assess their investments in other companies, where the investment's carrying value is adjusted to reflect the investor's share of the investee's income or losses.