Which of the following statements is correct with respect to flexible exchange rates?
A)they insulate the domestic economy from external shocks much more than fixed exchange rates
B)they are particularly attractive to nations subject to large external shocks
C)they provide less stability to an open economy subject to large internal shocks
D)all of the above

Question

Quizplus · Accepted Answer

Flexible exchange rates can insulate an economy from external shocks by allowing currency values to adjust, making them attractive for nations facing large external shocks. They also provide more stability compared to fixed rates in the face of internal shocks, as they allow for automatic adjustments in the balance of payments.

Which of the Following Statements Is Correct with Respect to Flexible