Practice Exam Questions

Fixed versus Floating Exchange Rates (MCQ Revision Question)

Level:
AS, A-Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 10 Jun 2017

When might a fixed exchange rate be preferred to a floating currency? This MCQ tests student understanding of this important topic.

Fixed versus Floating Exchange Rates (MCQ Revision Question)

Wrong options

A: Floating exchange rate provides partial auto-correction of a trade deficit

B: With fixed exchange rate, interest rates set to maintain currency stability not growth

C: Maintaining a fixed exchange rate requires the central bank to hold larger amounts of foreign currency reserves to intervene in the currency market if needed

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