Since 1973 "dirty floats" have been required because
A)PPP has not held.
B)high inflation countries have stronger currencies than countries with low inflation.
C)countries are not cooperating as much as original theorists predicted.
D)in the short run,monetary and fiscal policy only affects the autonomous home economy.
E)countries with a floating exchange rate have laissez-faire economies.

Question

Quizplus · Accepted Answer

The requirement for "dirty floats" (allowing some government intervention in the exchange rate) since 1973 is because the purchasing power parity (PPP) theory has not held true in practice, leading to fluctuations in exchange rates that are not always based on market fundamentals.

Since 1973 "Dirty Floats" Have Been Required Because