An advantage to a developing nation of fixed exchange rates is that it's:
A) easier for the central bank to print money to finance its deficit.
B) harder for the central bank to print money to finance its deficit.
C) easier to conduct fiscal policy.
D) harder for the government to raise taxes.

Question

Quizplus · Accepted Answer

With fixed exchange rates, the central bank cannot simply print more money to finance its deficit, as it risks causing inflation and undermining the value of its currency. This can encourage a developing nation to pursue more responsible fiscal policies in order to maintain the fixed exchange rate.

An Advantage to a Developing Nation of Fixed Exchange Rates