Asymmetric Shocks Pose a Problem for Nations Linked by Fixed

Multiple Choice

Asymmetric shocks pose a problem for nations linked by fixed exchange rates to a base currency. In general:

A) the home nation always has a better outcome than its foreign trading partner.
B) both nations share a common currency and so will experience equal results.
C) when the base currency nation takes any action to counteract the shock, it forces its exchange rate partner to do the same to maintain its peg.
D) both nations only get half the benefit of any economic policy.