Critics of floating exchange rates question the closeness of the link between the exchange rate and the trade balance.They claim 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)expansionist monetary policies adopted by a country.
D)extent of government control of industries in a country.

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 Question the Closeness of the Link