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.
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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