Proponents of fixed exchange rates, who argue that fixed exchange rates eliminate uncertainty and therefore promote international trade, sometimes fail to recognize:
A) that fixed exchange rates may not remain fixed forever.
B) that fixed exchange rates are more volatile than flexible exchange rates.
C) that exchange rates do not matter to businesses, so the uncertainty has no impact.
D) that international trade is bad for the economy and should not be promoted.

Question

Quizplus · Accepted Answer

Fixed exchange rates may not remain fixed forever, and sudden changes in exchange rates can create uncertainty and disrupt international trade. While proponents argue that fixed exchange rates eliminate uncertainty, this is not always the case.

Proponents of Fixed Exchange Rates, Who Argue That Fixed Exchange