Lower Transaction Costs Are a Benefit of Fixed Exchange Rates

question 12

Multiple Choice

Lower transaction costs are a benefit of fixed exchange rates. Therefore, relative prices in two trading nations linked by fixed exchange rates should:

• A) experience more price divergence.
• B) experience more price convergence.
• C) have less arbitrage and more speculation.
• D) have lower costs of production.

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Definitions:

Regulatory Flexibility Act

A U.S. law that aims to minimize the impact of regulations on small businesses and other small entities by requiring federal agencies to consider less burdensome alternatives.

Small Businesses

Enterprises characterized by a small number of employees, limited revenue, and size within their industry.

Less Burdensome Alternatives

Options or solutions that demand less effort, costs, or restrictions while achieving a similar outcome.

Occupational Safety

The discipline concerned with designing work environments and practices to prevent worker injury and illness.