Under a floating exchange rate system, a country's ability to expand or contract its money supply as it sees fit is limited by the need to maintain exchange rate parity.

Question

Quizplus · Accepted Answer

Under a floating exchange rate system, exchange rates are determined by market forces, allowing a country to expand or contract its money supply without the need to maintain a fixed exchange rate parity.

Under a Floating Exchange Rate System, a Country's Ability to Expand