A fixed rate system has several problems, an example of which is that
A)countries cannot maintain divergent economic goals indefinitely.
B)inflation can be handled easily.
C)unemployment problems are resolved among participating countries.
D)domestic problems can be ignored.

Question

Quizplus · Accepted Answer

A fixed rate system requires countries to maintain a fixed exchange rate. However, countries may have different economic goals which can lead to conflicts and unsustainable situations. For example, a country may want to maintain a low interest rate to stimulate growth, but this could cause its currency to depreciate, which would go against the fixed exchange rate. Ultimately, countries cannot maintain divergent economic goals indefinitely, making a fixed rate system problematic.

A Fixed Rate System Has Several Problems, an Example of Which