A floating exchange rate: I. leaves monetary policy available for domestic stabilization.
II) is less expensive to maintain than a fixed exchange rate.

Question

Quizplus · Accepted Answer

A floating exchange rate system allows monetary policy to be used for domestic stabilization as there is no fixed exchange rate target that needs to be maintained. Additionally, a floating exchange rate system is generally less expensive to maintain than a fixed exchange rate system as there is no need for interventions to maintain a target exchange rate.

A Floating Exchange Rate: I