Answer to Question 1
The dollar is a relatively stable currency, so by pegging the value of a country's currency to the dollar, the country provides reassurance that debts will be paid in a currency whose value doesn't fluctuate dramatically. This reduces the risk foreigners face in collecting returns on investments in that country. In addition, if imports are a significant fraction of the goods consumers buy, a decrease in the value of the country's currency can result in higher inflation. By pegging the country's currency, these fluctuations in the exchange rate don't occur, so inflation may be lower.
Answer to Question 2
TRUE
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