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CFA Level 2
Economics

Comparative Effects of Exchange Rate Regimes

Very Hard Currency Exchange Rates Exchange Rate Regimes

The international monetary system has evolved over time, with different countries adopting various exchange rate regimes based on economic conditions and policy objectives. One prominent aspect of these regimes is their impact on trade balances, inflation rates, and capital flows.

Consider the following scenarios involving three countries: Country A operates under a fixed exchange rate regime, Country B uses a floating exchange rate, and Country C has adopted a pegged regime where its currency is tied to Country A's currency. Given these circumstances, which of the following statements about the comparative impacts on their economies is true?

Hint

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