One advantage of a floating exchange rate system compared to a fixed or managed float exchange rate system is
A) it is easier for central banks to control inflation.
B) there is no need for government intervention.
C) it allows greater exchange rate stability.
D) it eliminates the possibility of depreciation during a recession.

Question

Quizplus · Accepted Answer

In a floating exchange rate system, the exchange rate is determined by market forces without government intervention. This allows for greater flexibility and eliminates the need for government intervention, which can sometimes be ineffective or even harmful. Additionally, a floating exchange rate system can help absorb external shocks without causing inflation or economic instability.

One Advantage of a Floating Exchange Rate System Compared to a Fixed