Answered

What is a benefit of a peg policy?

A. Intervention moves a country toward a free float ideal.
B. To destabilize the currency rate, some countries may switch their currency to the US dollar.
C. Many countries with low inflation have pegged their currencies to the dollar to restrain domestic inflation.
D. A peg stabilizes the import and export prices for developing countries.



Answer :

GinnyAnswer

Final answer:

Pegging to a strong currency can help restrain domestic inflation and stabilize import/export prices while possibly shifting focus from traditional monetary policy goals.


Explanation:

A benefit of a peg policy is that many countries with low inflation have pegged their currencies to the dollar to restrain domestic inflation.

For developing countries, a peg stabilizes the import and export prices, providing stability in international trade.

However, it's important to consider that pegged exchange rate policies can shift focus from controlling inflation or recession to managing the exchange rate, impacting monetary policy decisions.


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