The Case Against Fixed Exchange Rates Is

question 34

Multiple Choice

The case against fixed exchange rates is:

• A)the alleged smaller degree of uncertainty introduced into international trade and finance
• B)being more likely to lead to stabilizing speculation
• C)the greater price discipline than under flexible rates
• D)requires the use of policies to figure out how to deal with pressures on the foreign exchange rate

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Definitions:

Strip Bond

A debt security that pays no interest and is sold at a discount from its face value, with the investor receiving the bond's face value at maturity.

Compounded Semiannually

The process of applying interest to an investment or loan twice a year, resulting in compound growth.

Face Value

The nominal value or dollar value stated on a security or financial instrument, such as a bond.

Investment Yield

The income returned on an investment, such as the interest or dividends received, expressed as a percentage of the investment's cost.