Which of the Following Is an Advantage of a Free-Floating

question 124

Multiple Choice

Which of the following is an advantage of a free-floating exchange rate system?

• A) A free-floating exchange rate acts as a buffer to insulate an economy from the impact of international events.
• B) Under a system of free-floating exchange rates, a nation will, over the long run, experience more surpluses than deficits in its balance of payments.
• C) Fluctuating exchange rates reduces the risk involved in international transactions r and thus lower the cost of doing business with other countries.
• D) A free-floating exchange rate system improves the effectiveness of a country's monetary policy and promotes price stability.

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Definitions:

Anterior Cavity

A body cavity that includes the thoracic, abdominal, and pelvic cavities; it houses and protects the body's internal organs.

Posterior Cavity

A body cavity located towards the back of the human body, housing the brain and spinal cord within its cranial and spinal subdivisions.

Conjunctiva

The thin, transparent membrane lining the inner surface of the eyelid and covering the white part of the eyeball.

Mucous Membrane

A layer of epithelial cells that produce mucus, lining various cavities and tubes in the body to protect against infection.