When a nation is economically integrated with trading partners, fixed exchange rates:
A) would be very harmful to the dynamic nature of trade.
B) could promote integration and economic efficiency by keeping transaction costs low.
C) would be the best choice if that nation became the dominant nation in the transactions.
D) would be adequate but have the disadvantage of discouraging trade because of uncertainty.

Question

Quizplus · Accepted Answer

Fixed exchange rates can promote integration and economic efficiency by keeping transaction costs low when a nation is economically integrated with trading partners. This is because fixed exchange rates create a predictable environment for trade and reduce the costs of currency conversions, making it easier for businesses to engage in cross-border transactions. However, fixed exchange rates should be implemented carefully and with consideration to the specific economic conditions of the nations involved in the integration.

When a Nation Is Economically Integrated with Trading Partners, Fixed