How do exchange rate systems, such as fixed and floating exchange rates, influence international trade and financial stability? A) Exchange rate systems have no impact on international trade or financial stability. B) Fixed exchange rate systems promote exchange rate stability but can lead to trade imbalances, while floating exchange rate systems can enhance international trade but may result in exchange rate volatility. The choice of exchange rate system depends on a country's economic goals and preferences. C) Fixed exchange rate systems always lead to trade deficits. D) Floating exchange rate systems always lead to currency devaluation.
How do exchange rate systems, such as fixed and floating exchange rates, influence international trade and financial stability? A) Exchange rate systems have no impact on international trade or financial stability. B) Fixed exchange rate systems promote exchange rate stability but can lead to trade imbalances, while floating exchange rate systems can enhance international trade but may result in exchange rate volatility. The choice of exchange rate system depends on a country's economic goals and preferences. C) Fixed exchange rate systems always lead to trade deficits. D) Floating exchange rate systems always lead to currency devaluation.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question: How do exchange rate systems, such as fixed and floating exchange rates, influence international trade and financial stability? A) Exchange rate systems have no impact on international trade or financial stability. B) Fixed exchange rate systems promote exchange rate stability but can lead to trade imbalances, while floating exchange rate systems can enhance international trade but may result in exchange rate volatility. The choice of exchange rate system depends on a country's economic goals and preferences. C) Fixed exchange rate systems always lead to trade deficits. D) Floating exchange rate systems always lead to currency devaluation.
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