Which of the Following Is a Drawback of the Currency

question 68

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 dampener.
• 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 only when there are foreign exchange reserves to back it,thus arresting liquidity.
• D)It has all the disadvantages of a floating exchange rate regime.

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