Which of the Following Is Not an Advantage to a Country

question 93

Multiple Choice

Which of the following is not an advantage to a country of choosing to fix its exchange rate against a major currency,rather than choosing a floating exchange rate?

• A)Pegging allows the country more flexibility in conducting monetary policy.
• B)Pegging helps avoid inflation in imported goods caused by currency depreciation for countries with significant levels of imports.
• C)Pegging insures that interest payments stemming from foreign loans do not fluctuate with the value of the currency.
• D)Pegging reduces the uncertainty caused by currency fluctuations and thereby simplifies business planning.

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Definitions:

Treasury Bills

Short-term government securities issued at a discount from the face value and maturing at par, used by governments to raise funds and investors to park short-term funds.

Collection Time

The average period it takes for a business to receive payments owed by its customers in terms of accounts receivable.

Weekly Disbursements

Refers to payments made by a business on a weekly basis, potentially including payroll, supplier payments, or other operational expenses.

Interest Rate

The fee, represented as a proportion of the principal amount, that a lender imposes on a borrower for the utilization of assets.