A potential advantage of exchange rate target zones is that they may stabilize international trade patterns by reducing exchange rate volatility.

Question

Quizplus · Accepted Answer

Exchange rate target zones, also known as exchange rate bands, can limit the movement of exchange rates within a certain range, providing a degree of stability. This can reduce uncertainty for international traders, making it easier to plan and execute transactions. As a result, exchange rate target zones may stabilize international trade patterns by reducing exchange rate volatility.

A Potential Advantage of Exchange Rate Target Zones Is That