Which of the following is NOT among the pressures imposed by the fixed-rate system on the government of a country that has ongoing international payments deficits?
A)The country's money supply increases substantially resulting in a higher inflation.
B)The country faces a limit on its ability to sustain deficits.
C)If the country cannot sterilize, then its money supply will decrease.
D)The country suffers deterioration in its creditworthiness.

Question

Quizplus · Accepted Answer

The fixed-rate system does not necessarily lead to an increase in the country's money supply or inflation. Instead, it puts pressure on the government to maintain a balance of payments and avoid ongoing deficits. B, C, and D are all pressures that result from the fixed-rate system.

Which of the Following Is NOT Among the Pressures Imposed