The Country of Ninook Wants to Adopt a Floating Exchange

question 29

Multiple Choice

The country of Ninook wants to adopt a floating exchange rate system.Which of the following is an argument that Ninook can use to make a case 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:

National Income

The total value of all goods and services produced by a country's economy over a specific period, after accounting for depreciation.

GDP

Gross Domestic Product, a measure of the economic performance of a country, calculated as the total value of all final goods and services produced within a country's borders in a specific time period.

Economic Well-being

The state of individuals or groups having their basic financial and material needs met, along with access to opportunities for a better quality of life.

Self-sufficiency

The ability to fulfill all of one's needs without reliance on external resources, promoting independence and sustainability in living or economic practices.