Which of the Following Is Not a Potential Disadvantage of Freely

question 5

Multiple Choice

Which of the following is not a potential disadvantage of freely floating exchange rates?

• A) They require larger amounts of international reserves than other exchange systems
• B) Demand schedules for imports and exports may be price speculation
• C) There may occur large amounts of destabilizing speculation
• D) Capital movements among nations may be hindered via exchange rate fluctuations

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Definitions:

Interest Rate

The percentage charged on the total amount of borrowed money or paid on invested capital.

Compounding Periods

The frequency with which interest is added to the principal balance of a financial instrument, affecting the total interest earned or paid over time.

Periodic Payments

Regular payments made over a determined period, such as monthly rent or mortgage payments.

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