In theory with flexible exchange rates should allow countries to conduct ________ monetary and fiscal policies,exchange rates,but paradoxically the experience of the relatively flexible exchange rates of the 1970s suggests that such policies caused exchange rate ________.

Question

Quizplus · Accepted Answer

Flexible exchange rates should theoretically allow countries to conduct independent monetary and fiscal policies, but the experience of the 1970s showed that these policies caused exchange rate instability. Therefore, the best choice is B, which includes "independent" policies and acknowledges the issue of exchange rate instability. The other choices either include contradictory terms (e.g. "managed" and "unstable") or do not address the issue of exchange rate instability.

In Theory with Flexible Exchange Rates Should Allow Countries to Conduct