Which of the Following Is a Disadvantage of a Free-Floating

question 34

Multiple Choice

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

• A) A free-floating exchange rate system reduces the effectiveness of a country's monetary policy and increases the variability of inflation.
• B) Under a system of free-floating exchange rates, a nation will, over the long run, experience more deficits than surpluses in its balance of payments.
• C) Fluctuating exchange rates make international transactions riskier and thus increase the cost of doing business with other countries.
• D) A free-floating exchange rate amplifies the impact of international events on an economy.

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Definitions:

Discontinued Operations

Parts of a company's business that have been sold or otherwise disposed of, with their financial results reported separately from ongoing operations.

Cost of Goods Sold

The immediate expenses linked to the creation of a company's sold products, encompassing both the costs of materials and labor.

Net Sales

Total revenue from sales of goods or services, less returns, allowances for damaged goods, and discounts.

Operating Expense

Expenses incurred during normal business operations, such as rent, utilities, and payroll, excluding costs associated with the production of goods sold.