Which of the Following Is Not an Advantage to a Country

question 69

Multiple Choice

Which of the following is not an advantage to a country of choosing to fix its exchange rate against a major currency, rather than choosing a floating exchange rate?

• A)Pegging allows the country more flexibility in conducting monetary policy.
• B)Pegging helps avoid inflation in imported goods caused by currency depreciation for countries with significant levels of imports.
• C)Pegging insures that interest payments stemming from foreign loans do not fluctuate with the value of the currency.
• D)Pegging reduces the uncertainty caused by currency fluctuations and thereby simplifies business planning.
• E)Pegging often grants a central bank additional credibility.

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Definitions:

Probability

The likelihood that a particular event will happen, often expressed as a fraction or percentage reflecting the ratio of the occurrences of an event to the total number of possible outcomes.

Meeting

A gathering of two or more people that is conducted for the purpose of achieving a common goal through verbal interaction, such as sharing information or reaching agreement.

Relative Frequency

The proportion of times a particular value or event occurs in relation to the total number of observations or trials.

Historical Data

Data collected from past events used to analyze trends, forecast future occurrences, or establish baselines in various fields like finance, meteorology, or scientific research.