Economics (MindTap Course List)
Economics (MindTap Course List)
What are the strong and weak points of the flexible exchange rate system? What are the strong and weak points of the fixed exchange rate system?
Strong and weak points of flexible and fixed exchange rate systems.
Under the fixed exchange rate system, the exchange rate is pre-determined and government changes their policies such as revaluation and devaluation of currencies to maintain the exchange rate at a fixed level. The fixed exchange rate will not change with the market fluctuations. The advocates of fixed exchange rate argue that it promotes international trade. The fixed exchange rate is an essential component of international trade. However, on the other hand, the fixed exchange rate breaks up the whole market. It is because many currencies for different states, instead of a single currency in a country will deteriorate the trade.
The flexible exchange rate system works under the market conditions...
Chapter 34 Solutions
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