Based on economic criteria, a nation should choose a fixed exchange rate if:
A) the monetary authorities are capable of handling shocks.
B) the net benefits of fixing versus floating are positive.
C) the net benefits of fixing versus floating are negative.
D) there is a liberal political agenda that restricts government authority over capital flows.

Question

Quizplus · Accepted Answer

A nation should choose a fixed exchange rate if the net benefits of fixing versus floating are positive, meaning that the advantages of a fixed exchange rate (such as increased stability and predictability) outweigh the disadvantages (such as loss of monetary policy autonomy). This decision should be made based on economic analysis and evidence, rather than political agenda or other factors.

Based on Economic Criteria, a Nation Should Choose a Fixed