Question

Assume that the United States, Mexico and Canada entered into an agreement to adopt a fixed rate exchange system. What are the likely consequences of a fixed rate system for international businesses

Answer 1

Fixed exchange rate refers exchanged rate is determined by the government in terms of the other country here exchange rate value fixed all the international trade take place this value.

The following the advantages of the economy following the fixed exchange rate system.

• The capital moves between countries without any hesitation
• Encourages stable export and imports too much depreciation fo the currency value or appreciation reduced
• It helps to control inflation.
• The speculation in foreign trade and financial market reduced.

These are the main benefits of the fixed rate exchange advantages.