Which of the following holds true for a pegged exchange rate system?

QUESTION

Which of the following holds true for a pegged exchange rate system?

A. Adopting a pegged exchange rate regime increases inflationary pressures in a country.

B. It is necessary for a country whose currency is chosen for the peg to pursue a sound monetary policy.

C. Pegged exchange rates are popular among many of the world’s largest and developed nations.

D. The value of a pegged currency falls when the reference currency rises in value.

E. It is similar to a floating exchange rate system rather than a fixed system.

ANSWER

B