Advocates of floating rate suggested it is favorable for economies for all of the following reasons EXCEPT
A) it discourages attack from foreign exchange speculators because of the fact that exchange rate adjustment is immediate.
B) it helps stabilize the shock effect on unemployment in case of economic changes such as a fall in export demand.
C) it automatically matches the domestic inflation with ongoing foreign inflation.
D) it gives every country the opportunity to guide its own monetary conditions at home.
E) it brings the LR exchange rate to the level predicted by PPP without government policy decisions.

Question

Quizplus · Accepted Answer

Advocates of floating rate suggest that it discourages attack from foreign exchange speculators, helps stabilize the shock effect on unemployment, gives every country the opportunity to guide its own monetary conditions at home, and brings the LR exchange rate to the level predicted by PPP without government policy decisions. However, it does not automatically match the domestic inflation with ongoing foreign inflation.

Advocates of Floating Rate Suggested It Is Favorable for Economies