If a Nation Maintains Fixed Exchange Rates, It May Be

question 50

Multiple Choice

If a nation maintains fixed exchange rates, it may be a haven for foreign investment if:

• A) investors (irrationally fearing the peg will not hold) demand higher interest rates (risk premium) on investments denominated in the currency.
• B) investors make more money when they go against conventional wisdom and put money in riskier investments.
• C) there is more certainty over the real return on investments.
• D) its government taxes returns from those investments.

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The degree to which individuals are inclined to accept and incorporate ideas or beliefs without sufficient evidence or critical analysis.

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