Question

Based on the premise that, other things equal, many developing countries would prefer a fixed exchange rate, which of the following statements is NOT true? a) Fixed rates provide stability in international prices for the conduct of trade. b) Fixed exchange rate regimes necessitate that central bank of the country maintains large quantities of reserves in its own national currency. c) Stable prices support growth of international trade and lessen exchange rate risks for businesses.

Answer 1

The answer is B -) Fixed exchange rate regimes necessitate that central bank of the country maintains large quantities of reserves in its own national currency

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because, fixed exchange rate regime help provide stabiltiy in international price for the trade because when price remain fixed the trader can set thier price in order to maximize its sales and revenueand and it help in decreasing the risk associated with the international trade , therefore optiona A and option C are the true statement. and if the statement D is not avaialable then, the option B is not correct.