Proponents of freely floating exchange rates maintain that
A) central banks can easily modify fluctuations in exchange rates.
B) the system allows policy makers freedom in pursuing domestic economic goals.
C) inelastic demand schedules prevent large fluctuations in exchange rates.
D) inelastic supply schedules prevent large fluctuations in exchange rates.

Question

Quizplus · Accepted Answer

Proponents of freely floating exchange rates argue that the system allows policy makers the freedom to pursue domestic economic goals without being constrained by exchange rate targets. They do not believe that central banks can easily modify fluctuations in exchange rates or that the inelastic supply and demand schedules prevent large fluctuations in exchange rates.

Proponents of Freely Floating Exchange Rates Maintain That