Which One of the Following Is/are INCORRECT? an Argument Against

question 40

Multiple Choice

Which one of the following is/are INCORRECT? An argument against floating exchange rates is that

• A)a fixed rate automatically prevents instability in the domestic money market from affecting the economy if shocks come from home domestic money market.
• B)a fixed rate might become unpredictable,complicating economic planning.
• C)a rise in money demand under a fixed exchange rate would have no effect on the exchange rate and output.
• D)a fixed rate functions within the price-specie-flow mechanism and maintains a balance of payments equilibrium.
• E)a fixed rate automatically prevents instability in the economy from output market shocks.

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