The foreign exchange system that has the highest foreign exchange risk is
A) the Gold Standard
B) the fixed exchange rate.
C) the floating exchange rate.
D) the Bretton Woods system.

Question

Quizplus · Accepted Answer

The floating exchange rate system has the highest foreign exchange risk because the exchange rate is determined by market forces of supply and demand, and can fluctuate significantly over short periods of time. This can create uncertainty for businesses and investors who need to make decisions based on exchange rate movements. In contrast, fixed exchange rate systems, such as the Gold Standard and the Bretton Woods system, provide more stability in exchange rates, but also limit a country's ability to respond to economic changes.

The Foreign Exchange System That Has the Highest Foreign Exchange