A Problem with Currency Boards Is That the Central Bank

question 52

Multiple Choice

A problem with currency boards is that the central bank loses:

• A) control over the government budget.
• B) a flexible exchange rate is always preferred to a pegged exchange rate.
• C) influence over interest rates.
• D) the ability to supervise banks.

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Definitions:

Cartel

A cartel refers to an association of independent businesses or countries that collaborate to manipulate prices and limit competition for certain goods or services.

Cartel

An agreement between competing firms to control prices or exclude entry of a new competitor in a market, usually to increase market power and profits.

Formal Agreement

refers to a legally binding contract between parties that outlines specific obligations and rights.

Covert Collusion

A secret agreement between firms to fix prices, limit production, or engage in other practices to restrict competition illegally.