When Argentina adopted a _, it lost its ability to conduct .
A)flexible exchange rate; fiscal policy
B)fixed interest rate; monetary policy
C)free trade regime; tax policy
D)currency board; monetary policy

Question

Quizplus · Accepted Answer

When Argentina adopted a currency board, it pegged the Argentine peso to the US dollar at a fixed exchange rate. This meant that the country lost its ability to conduct independent monetary policy as it could no longer control its money supply. The central bank had to maintain sufficient foreign reserves to back the amount of pesos in circulation, effectively outsourcing its monetary policy to the US Federal Reserve.

When Argentina Adopted a _, It Lost Its Ability to Conduct