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Which is preferable: a fixed or a flexible exchange rate? Why? a) Fixed because it provides...

Which is preferable: a fixed or a flexible exchange rate? Why?

a) Fixed because it provides international monetary stability and forces governments to make adjustments to meet their international demands.

b) Both fixed and flexible exchange rate systems have advantages and disadvantages. It depends on the normative goals for the economy.

c) Flexible because it allows for incremental changes and gives governments flexibility in conducting domestic monetary and fiscal policy.

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Answer #1

b) Both fixed and flexible exchange rate systems have advantages and disadvantages. It depends on the normative goals for the economy.

Explanation: Both the systems have their own advantages and faults. The best policy would depend on what kind of economic goal the country is trying to achieve.

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