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A floating exchange rate:

I.   Leaves the monetary policy available for domestic stabilization.
II.  Is less expensive to maintain than a fixed exchange rate.
III. Adds uncertainty to international trade.

 

a. I only. 

b. III only. 

c. I, II and III. 

d. II only. 

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Darryn D'Souza
Darryn D'SouzaLv10
28 Sep 2019

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Related questions

The proponents of fixed exchange rates argue that flexible exchange rates will? 
 
a)hamper international trade because of uncertainty over what the exchange rate will be.
b)force a nation to use its domestic macroeconomic policies to maintain an exchange rate.
c)lead to trade protectionism.
d)a and b

Assume that you are an economic advisor and your focus is on understanding the different types of exchange rate systems. You have been hired to understand the shifts in monetary policy and their influence on monetary policy. The only causes of fluctuations in stock prices are unexpected shifts in monetary policies. Now, your task is to explain whether a fixed or floating exchange rate system would cause greater gains from international asset trade. In your answer, focus on the change in policy with regard to monetary policy and its influence on exchange rates.

Assume that you are an economic advisor and your focus is on understanding the different types of exchange rate systems. You have been hired to understand the shifts in monetary policy and their influence on monetary policy. The only causes of fluctuations in stock prices are unexpected shifts in monetary policies. Now, your task is to explain whether a fixed or floating exchange rate system would cause greater gains from international asset trade. In your answer, focus on the change in policy with regard to monetary policy and its influence on exchange rates.

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