Which of the Following Is a Drawback of the Currency

question 31

Multiple Choice

Which of the following is a drawback of the currency board system?

• A)The ease with which governments can set and manipulate interest rates acts as a limitation.
• B)Higher domestic inflation rates compared to the inflation rate in the country to which the currency is pegged can make the currency uncompetitive.
• C)The currency board can issue additional domestic notes and coins even when there are no foreign exchange reserves to back it.
• D)The system is a true fixed exchange rate regime, because the domestic currency is fixed against other currencies.
• E)The system lacks commitment to convert domestic currency on demand into another currency.

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Definitions:

Disadvantages

Disadvantages refer to the unfavorable or negative aspects of a particular situation, decision, or solution.

Corporation

A legal entity that is separate and distinct from its owners, providing them with limited liability protection.

Business Conducting

The practices, strategies, and ethical standards employed by a company in its daily operations and decision-making processes.

Advantages

Positive aspects or benefits that contribute to superior performance or competitive edge.