Which of the following problems will most likely occur with a system of flexible exchange rates?
A)macroeconomic instability as exports and imports fluctuate with the exchange rates
B)government favoritism toward selected importers of goods and services
C)the emergence of black markets for foreign currency
D)distortions in trade patterns away from the pattern suggested by comparative advantage

Question

Quizplus · Accepted Answer

Flexible exchange rates can lead to macroeconomic instability as exports and imports fluctuate with the exchange rates, affecting the balance of trade and potentially leading to economic uncertainty.

Which of the Following Problems Will Most Likely Occur with a System