Nations are free to choose and use their own currency and control its value. Normally, they must choose between a ______ regime.
A) fixed or floating exchange rate
B) variable or stable exchange rate
C) controlled or laissez-faire
D) centrally planned or market-based

Question

Quizplus · Accepted Answer

Nations must choose between a fixed or floating exchange rate regime when deciding on their currency policy. A fixed exchange rate regime means that a country's currency is fixed to the value of another currency, such as the US dollar. This can provide stability but may limit a country's ability to respond to economic shocks. A floating exchange rate regime means that a currency's value is determined by market forces, which can lead to fluctuations but allows a country more flexibility in responding to economic conditions.

Nations Are Free to Choose and Use Their Own Currency