One of the Principal Advantages of Adopting a Fixed Exchange

question 22

Multiple Choice

One of the principal advantages of adopting a fixed exchange rate is

• A) relinquishing independent monetary policy
• B) that it prevents a nation from having to impose restrictions on capital flows
• C) that interest rates no longer have to be restricted
• D) that currency values may appreciate or depreciate nominally, but cannot fluctuate in real terms
• E) that the domestic economy is insulated from events overseas

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Definitions:

Dividend

A share of a corporation's profits allocated to its shareholders, typically in cash or in the form of more shares.

Portfolio Beta

A metric that compares the volatility or systematic risk of a portfolio with that of the broader market.

T-bill Rate

The interest rate that U.S. Treasury bills, short-term government securities, yield.

Market Return

The total return of the entire stock market or a specific market segment, encompassing capital gains and dividends over a specified period.