Which of the following is one of the difficulties associated with exchange controls?
A) The ease of dealing with an efficient government agency
B) The difficulty of keeping the nominal and the real exchange rates aligned
C) Maintaining purchasing power parity
D) The relative simplicity of balancing inflows and outflows of foreign exchange
E) The stability of the real exchange rate.

Question

Quizplus · Accepted Answer

Exchange controls often lead to a misalignment between nominal and real exchange rates because they interfere with the natural supply and demand dynamics of currency markets. This can create distortions in the economy, making it difficult to maintain a stable and realistic exchange rate.

Which of the Following Is One of the Difficulties Associated