Fixed exchange rates create problems because they:
A) tend to encourage short-term capital inflows.
B) tend to be undervalued.
C) create instability among investors.
D) all of the above.

Question

Quizplus · Accepted Answer

Fixed exchange rates can encourage short-term capital inflows as investors seek to take advantage of stable currency values, potentially leading to economic imbalances.

Fixed Exchange Rates Create Problems Because They