Which of the following is a disadvantage of using a rigid policy of fixed exchange rates?
A) It is likely to create high unemployment in some cases.
B) It will lead to inflationary economies across the world.
C) It is likely to bring about trade wars between nations.
D) It will instigate competitive devaluations and intense competition.

Question

Quizplus · Accepted Answer

A rigid policy of fixed exchange rates would be too inflexible. In some cases, a country's attempts to reduce its money supply growth and correct a persistent balance-of-payments deficit could force the country into recession and create high unemployment.

Which of the Following Is a Disadvantage of Using a Rigid