Question

Do you think a fixed exchange rate would make sense for a large economy like ours?

Answer 1

ANS:The fixed exchange rate is also known as pegged exchange rate.This is one of the exchange rate system in which money value is stable against either the worth of another unique currency, a container of another currencies or any other estimation of worth like gold.

-- The fixed exchange rate sometimes decreases uncertainty in original economic activity.

-- The central bank can obtain reliability by stabilizing their countries money to that of a much trained nation.

-- When we are seeing from a micro economic highness, a nation with poor growth otherwise It forces illiquid money market sometimes stabilize their exchange rates to give its inhabitant with a fake money market with the liquidity of market place of the nation that gives the vehicle money.

-- A stabilized exchange rate decreases volatility and variations in comparative costs.

-- It avoids exchange rate difficulties by decreasing the related unreliability.

-- It forces correct regulations on the financial jurisdiction.

-- The international dealings and funding flows between nations are encouraged.

-- It also prevents bill monetization or tax payout financed by bill, that the financial control purchases up.This can avoid big inflation.

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