Critics of floating exchange rates claim that trade deficits are determined by the:
A)balance between savings and investment in a country.
B)external value of the currency of a country.
C)exchange rates of other currencies.
D)valuations made by International Monetary Fund and the World Bank.
E)mechanism of competitive currency devaluation.

Question

Quizplus · Accepted Answer

Those in favor of floating exchange rates argue that floating rates help adjust trade imbalances. Critics question the closeness of the link between the exchange rate and the trade balance. They claim trade deficits are determined by the balance between savings and investment in a country, not by the external value of its currency.

Critics of Floating Exchange Rates Claim That Trade Deficits Are