A Potential Disadvantage of Freely Floating Exchange Rates Is That

question 38

Multiple Choice

A potential disadvantage of freely floating exchange rates is that there would

• A) exist excessive amounts of hedging in the foreign exchange markets.
• B) be a lack of incentive to initiate exchange arbitrage.
• C) be excessive amounts of destabilizing speculation.
• D) exist a devaluation bias in the exchange markets.

---

Definitions:

Vertical Blinds

Window coverings consisting of vertical slats that can be adjusted to control light and visibility.

Null Hypothesis

A statistical hypothesis that assumes no significant difference or effect in a particular situation, serving as the default assumption to be tested against an alternative hypothesis.

Alternative Hypothesis

A statistical hypothesis that specifies a population parameter's value is different from the value stated in the null hypothesis.

Pooled Estimate

A method used to combine estimates from different groups or studies to obtain a common estimate when the groups are considered homogeneous.