If there is a greater degree of economic similarity between the home nation and the base currency nation, the economic stabilization benefit of pegged exchange rates:
A) gets smaller.
B) becomes more equal.
C) gets larger.
D) disappears.

Question

Quizplus · Accepted Answer

When there is a greater degree of economic similarity between the home nation and the base currency nation, the economic stabilization benefits of pegged exchange rates get larger. This is because similar economies are likely to experience similar economic shocks and trends, making a pegged exchange rate more effective in stabilizing the economy.

If There Is a Greater Degree of Economic Similarity Between