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

Question

Quizplus · Accepted Answer

A floating exchange rate allows for automatic adjustment to changes in the output market. A fixed exchange rate would require intervention from the central bank to maintain the rate, which could be difficult or impractical during times of economic disturbance. A crawling peg exchange rate, which adjusts gradually over time, may provide some stability but still may not be as effective as a floating exchange rate.

When the Economy Is Disturbed by a Change in the Output