For a floating currency system to be effective:
A)the currency markets must be subject to significant regulation and the central bank must be willing to take action when predetermined indicators suggest action is necessary.
B)the currency market must be diversified and must not be dominated by any specific currency.
C)there must be effective market and monetary infrastructures and the currency market must be large and liquid.
D)the central bank of the nation must have cooperative agreements with the central banks of other nations that allow those other central banks to take actions to stabilize the subject currency.

Question

Quizplus · Accepted Answer

For a floating currency system to be effective, there must be effective market and monetary infrastructures, and the currency market must be large and liquid. This means that there should be enough buyers and sellers in the market to ensure that the exchange rate is determined by market forces rather than being dominated by a few players. Additionally, there must be a solid financial infrastructure that supports the smooth functioning of the currency market. Without these components, a floating currency system may not work as intended. While the other options mentioned may be factors that contribute to a successful floating currency system, they are not as crucial as having a large and liquid currency market with an efficient infrastructure.

For a Floating Currency System to Be Effective