Paul Krugman Has Analyzed Fixed Currency Pegs and the Likely

Multiple Choice

Paul Krugman has analyzed fixed currency pegs and the likely cause for them to break. His model is one in which the central bank is under political control, which results in:

A) fiscal dominance by the elected government whereby the central bank must print money to fund government deficits.
B) authority of the central bank to set rules for proper monetary management.
C) the establishment of a currency board to manage the pegged exchange rate.
D) the ability to control the money supply and interest rates to maintain the peg.