The country of Ninook wants to adopt a floating exchange rate system.Which of the following is an argument that Ninook can use to make a case for a floating exchange rate system?
A)Each country should be allowed to choose its own inflation rate.
B)Speculation in exchange rates dampens the growth of international trade and investment.
C)Unpredictability of exchange rate movements makes business planning difficult.
D)Removal of the obligation to maintain exchange rate parity destroys a government's monetary control.
E)Trade deficits can be determined by the balance between savings and investment in a country,not by the external value of its currency.

Question

Quizplus · Accepted Answer

A floating exchange rate allows a country to have independent monetary policy, including choosing its own inflation rate, without the need to maintain a fixed exchange rate.

The Country of Ninook Wants to Adopt a Floating Exchange