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Fixed vs Floating Exchange Rates Quiz

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1. What is a Fixed Exchange Rate?

2. What is a Floating Exchange Rate?

3. Which system allows for automatic correction of balance of payment disequilibrium?

4. Which system might limit foreign investment due to the lack of exchange rate risk?

5. Which system does not require the government to use its foreign exchange reserves to stabilize the currency?

6. Under which system is the chances of currency speculation higher?

7. Which system generally requires a country to maintain large reserves of foreign currency?

8. Under which system does the government have more control over the inflation rate?

9. Which system allows the exchange rate to be influenced by changes in monetary policy?

10. Under which system can sudden large revaluations or devaluations occur?