One disadvantage of a floating exchange rate system compared to a fixed or managed float exchange rate system is
A) it does not allow the exchange rate to reflect demand and supply in the market.
B) it is difficult to maintain.
C) it can make business planning difficult.
D) it eliminates the possibility of depreciation during a recession.

Question

Quizplus · Accepted Answer

A floating exchange rate can lead to unpredictable fluctuations, making it challenging for businesses to plan for future costs and revenues.

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