Explain Why So Many Countries Have Moved to a Floating

question 7

Essay

Explain why so many countries have moved to a floating exchange rate system.What challenges does a floating exchange rate pose for businesses? How does the FX market help entities manage the risks posed by exchange rate volatility?

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Definitions:

Social Facilitation

The tendency for individuals to perform better on tasks when in the presence of others than when alone.

Wisdom of the Crowd

The phenomenon that collective judgment or decision of a diverse group of individuals is often more accurate than that of any single member of the group.

Ringelmann Effect

The phenomenon where individual productivity decreases as the size of a group increases, often due to coordination and motivation issues.

Anonymity

The state of being anonymous, where an individual's identity is not known or revealed.