Proponents of the managed ﬂoating exchange rate system argue that it has
A) added the volatility needed by the exchange rate market.
B) been effective because it is a "nonsystem" without ﬁxed rules.
C) been suﬃciently ﬂexible to weather major economic turbulence.
D) resolved major problems in balance of payments surpluses and deﬁcits.

Question

Quizplus · Accepted Answer

Proponents of the managed floating exchange rate system argue that it has been sufficiently flexible to weather major economic turbulence. While it does not have fixed rules like a fixed exchange rate system, it is still managed by central banks and allows for some control over the exchange rate. Additionally, it has not necessarily resolved major problems in balance of payments surpluses and deficits, but rather provides a framework for addressing those issues. The system may also add volatility, but this is not necessarily seen as a positive by all proponents.

Proponents of the Managed ﬂOating Exchange Rate System Argue That