Why do developing countries have floating exchange rates?
A) to insulate themselves from world inflation
B) to stabilize government deficits
C) to keep reserves low
D) to keep their money value higher than the dollar

Question

Quizplus · Accepted Answer

Developing countries often have floating exchange rates to insulate themselves from world inflation. Fixed exchange rates can be difficult to maintain when a country's economy and inflation levels are not as stable as those of the countries with whom they are trading. A floating exchange rate allows a country to adjust their currency's value based on market demand and supply without potentially harmful consequences from maintaining a fixed exchange rate.

Why Do Developing Countries Have Floating Exchange Rates