Why Do Small Countries That Trade a Lot Generally Prefer

question 11

Multiple Choice

Why do small countries that trade a lot generally prefer to fix their exchange rates?

• A)Fixed exchange rates limit the inflation small countries are prone to.
• B)Fixed exchange rates provide more price stability and reduce risks for exports.
• C)Small countries do not have enough market size to adequately control their own flexible exchange rates when trade flows change.
• D)Small countries are unable to resist pressure from the United States to fix their currency to the dollar.