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:

Blended Family

A family unit created by merging two previously separate families, often including children from one or both original families.

Single-Parent

Pertains to a family unit led and managed by one parent alone.

Biological Son

A male offspring who shares genetic material with his parents.

Natural Family

A concept often referring to a family structure centered around biological relations.