In the example of the peg between Britain and Germany, what would have been the case if Britain had allowed the pound to float and depreciate after Germany's GDP rise?
A) Britain would have suffered depreciation and a recession.
B) Britain would have had to raise interest rates.
C) Britain would no longer be eligible to join the new euro currency.
D) Britain could have lowered interest rates and enjoyed an added boost to GDP.

Question

Quizplus · Accepted Answer

If Britain had allowed the pound to float and depreciate after Germany's GDP rise, it would have made British exports cheaper and more competitive on the international market, leading to an increase in demand for British goods and services. This could have potentially stimulated GDP growth and allowed Britain to lower interest rates to promote economic expansion.

In the Example of the Peg Between Britain and Germany