Business, 29.07.2020 04:01 migos2377

One of the oldest debates in economics is whether a currency should have a fixed or floating exchange rate. There is no single solution that fits all economies. The choice of an exchange rate system depends on many factors, including the openness to international trade, maturity of the financial system, inflation, labor market flexibility, and credibility of policymakers. Consider two countries, Opland and Lovenia. Opland is a small, open economy with a large share of its national output created through trade. Lovenia has much higher inflation than its trading partners.
In the following table, indicate the exchange-rate system that would be more beneficial for each country.
Pegged (Fixed) Exchange Rates Flexible Exchange Rates
Opland
Lovenia

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