Question

What is fixed exchange rate of advantages and disadvantages?

Answer 1

ADVANTAGE OF THE FIXED EXCHANGE RATE

*promotes International trade

*necessary for small nation

*promotes International investment

*removes sperculation

*suitable for currency area

*not permantly fixed.

DISADVANTAGE OF FIXED EXCHANGE RATE

*discourage foreign investment

*monetary dependence

*difficulties for IMI systems

*cost price relationship not reflected

*not a genuinely fixed system

*outmoded system

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