Select the correct benefits and drawbacks to a fixed exchange rate:
a. Could be based on attachment to precious metals (gold) but could lead to inflation if a country prints too much money.
b. Could be used to replace domestic currency if the currency is weak, financial institutions are suspicious, and the dollar is strong.
c. Could do very well if tied to a strong currency but suffers from vulnerability to other nation’s recession.
d. Supply and demand are market driven but governments can manipulate value by either printing money or removing currency from circulation.
Ans: a
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