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:

National Output

The total value of all goods and services produced within a country's borders in a given time period, often referred to as Gross Domestic Product (GDP).

Consumer Goods

Goods produced and purchased for personal or household consumption rather than for manufacturing or resale.

Competitive System

An economic system where multiple businesses or entities vie for the same market share, promoting innovation and consumer choice.

Private Sector

The part of the economy that is not controlled by the government and is run by individuals and companies for profit.