When the economy is disturbed by a change in the output market

Question

Quizplus · Accepted Answer

When the economy is disturbed by a change in the output market, a floating exchange rate has an advantage over a fixed rate because it allows for greater flexibility in response to market changes. With a fixed exchange rate, the value of the currency is fixed, which can lead to a loss of competitiveness in the export market and worsen the effects of the disturbance on the economy. A floating exchange rate, on the other hand, can adjust to changes in the output market and help stabilize the economy.

When the Economy Is Disturbed by a Change in the Output