Advocates of flexible exchange rates claim that under flexible exchange rates

Question

Quizplus · Accepted Answer

Advocates of flexible exchange rates argue that under this system, countries would not be forced to import only inflation or only deflation from abroad. Instead, exchange rates would adjust based on relative price levels, ensuring that countries are not forced to bear the full burden of inflation or deflation. This helps to promote greater stability in the global economy. However, flexible exchange rates are not a panacea and may still result in the importing of inflation or deflation to some extent.

Advocates of Flexible Exchange Rates Claim That Under Flexible Exchange