If a Government Is Unwilling to Accept Occasional Deflation and Inflation

question 34

Multiple Choice

If a government is unwilling to accept occasional deflation and inflation caused by balance of payments adjustments,

• A) it cannot maintain a fixed exchange rate system.
• B) it must maintain a fixed exchange system.
• C) it can both stabilize exchange rates and domestic prices at the same time.
• D) it cannot trade with other countries.
• E) it cannot maintain a floating exchange system.

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