Fixed exchange rates lead to speculation and uncertainty in the value of currencies.

Name: Fixed exchange rates lead to speculation and uncertainty in the value of currencies.
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Question

Quizplus · Accepted Answer

Speculation can make exchange rates volatile in the floating exchange rate system. Speculation also adds to the uncertainty surrounding future currency movements that characterizes floating exchange rate regimes. A fixed exchange rate eliminates such uncertainty.

Fixed Exchange Rates Lead to Speculation and Uncertainty in the Value