Which of the Following Is an Argument for a Floating

question 37

Multiple Choice

Which of the following is an argument for a floating exchange rate system?

• A)Each country should be allowed to choose its own inflation rate.
• B)Speculation in exchange rates dampens the growth of international trade and investment.
• C)Unpredictability of exchange rate movements makes business planning difficult.
• D)Removal of the obligation to maintain exchange rate parity destroys a government's monetary control.
• E)Trade deficits can be determined by the balance between savings and investment in a country, not by the external value of its currency.

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Definitions:

Output

The quantity of goods or services produced within a given time period.

Factor Prices

The costs of the inputs that are used in the production of goods or services.

Production Function

A mathematical relationship describing the maximum output possible from a given set of inputs.

Units Of Output

The total quantity of goods or services produced by a company or industry in a specific period.