The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-One of the advantages of floating exchange rates is that:
A)consumers always know how much imported goods cost.
B)businesses always know, in advance, what future exchange rates will be.
C)countries are free to pursue their own macroeconomic policies without maintaining exchange rates.
D)countries cannot act independently and must thus coordinate their macroeconomic policies.
E)the global interest rate tends to decline to the lowest possible level.

Question

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2
 
-One of the advantages of floating exchange rates is that:
A)consumers always know how much imported goods cost. 
B)businesses always know, in advance, what future exchange rates will be. 
C)countries are free to pursue their own macroeconomic policies without maintaining exchange rates. 
D)countries cannot act independently and must thus coordinate their macroeconomic policies. 
E)the global interest rate tends to decline to the lowest possible level.

Quizplus · Accepted Answer

One of the advantages of floating exchange rates is that countries are free to pursue their own macroeconomic policies without being tied to maintaining a fixed exchange rate. This allows for greater flexibility and independence in promoting economic growth and stability. A and B are incorrect because exchange rates under floating exchange rates can still fluctuate, making it difficult for consumers and businesses to predict future costs. D and E are also incorrect as they are not advantages of floating exchange rates.

The Figure Given Below Depicts the Foreign Exchange Market for British