Which type of country is better off using a Fixed Exchange Rate system as opposed to a Flexible Exchange Rate System?

  a) a country with high inflation rates. 

  b) a country with a large ratio of exports plus imports to GDP. 

  c) both a. and b. 

  d) neither a. nor b. 

• C.both a. and b.

Step-by-step explanation

• Generally ,the types of countries which are better in using fixed interest rate systems as opposed to flexible systems are those with high inflation rates and countries with with a large ratio of exports plus imports to GDP.
• Basically, fixed interest rate systems play a vital role in lowering the rate of inflation.As the interest ares are fixed the rates of inflation are kept low to reduce the chances of the currency from reducing from the targeted level.In other words the purpose of the fixed interest rate system is to maintain the value of the country currency by reducing the high rates of inflation.
• Also, fixed interest rate system is used in countries which have a large ratio of exports plus imports to GDP. This is mainly to help minimize chances of uncertainty over fluctuations in the currency.Fixed interest rates systems gives the investors and exporters a great confidence.In other words fixed systems are more better for countries with high inflation rates and those with large ratio of exports plus imports to GDP because, they help reduce the fluctuations of the currency, it is an incentive to keep the rates of inflation low, avoids devaluation and encourages firms and both importers and exporters to invest.