Under a flexible as compared to a fixed exchange rate system:
A)a nation can more easily achieve its desired inflation-unemployment tradeoff
B)it is more difficult for a nation to achieve its desired inflation-unemployment tradeoff
C)it is more difficult for a nation to achieve internal balance
D)it is more difficult for a nation to achieve external balance

Question

Quizplus · Accepted Answer

Under a flexible exchange rate system, a nation can adjust its exchange rates to achieve its desired inflation-unemployment tradeoff. With a fixed exchange rate system, a nation's ability to adjust its exchange rates is limited, making it more difficult to achieve its desired inflation-unemployment tradeoff.

Under a Flexible as Compared to a Fixed Exchange Rate