Advocates of the Fixed Exchange Rate System Argue All of the Following

question 145

Multiple Choice

Advocates of the fixed exchange rate system argue all of the following except one.Which is the exception?

• A)Fixed exchange rates are not vulnerable to the actions of speculators.
• B)Fixed exchange rates introduced greater future certainty into trading which will increase the volume of international trade.
• C)Fixed exchange rates are able to adjust rapidly so as to attract foreign investment.
• D)With fixed exchange rates,export and import industries do not suffer severe and unpredictable fluctuations in business.
• E)The certainty that comes from fixed exchange rates increases the volume of international investment.

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Definitions:

Conversion Feature

A provision in some financial instruments that allows the holder to convert the instrument into another asset, often shares of the company's common stock, at a predetermined price.

Convertible Bonds

Bonds that can be converted into a predetermined amount of the issuing company's equity at certain times during their life, usually at the discretion of the bondholder.

Callable

A term describing a financial security (such as a bond) that the issuer has the right to redeem before its maturity date, usually at a specified call price.

Mortgage Bonds

Debt securities secured by a mortgage on the issuer's property, prioritizing bondholder claims on assets in case of default.