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

Question

Quizplus · Accepted Answer

A floating exchange rate system allows for autonomous monetary policy aimed at domestic stabilization, is less costly to maintain compared to a fixed exchange rate system since it doesn't require intervention to maintain exchange rate levels, and introduces uncertainty to international trade due to potential fluctuations in exchange rates.

A Floating Exchange Rate: I