A floating exchange rate: I. leaves monetary policy available for domestic stabilization.
II) reduces the uncertainty of international trade.

Question

Quizplus · Accepted Answer

A floating exchange rate allows the central bank to use monetary policy tools to manage domestic economic conditions, such as inflation or unemployment. However, it does not necessarily reduce the uncertainty of international trade because exchange rates can still fluctuate significantly in response to economic events or policies.

A Floating Exchange Rate: I