Th4.3: MOS - Floating Exchange Rate Systems Flashcards
1
Q
What determines currency in these systems?
A
market forces determine the currency
2
Q
What are the benefits of floating exchange rate systems?
A
their gold and foreign currency reserves and the government doesn’t have to intervene
3
Q
What are problems with floating exchange rate systems?
A
currency can be volatile, making it difficult for exporters/importers to make decisions about the future and can cause large changes in macroeconomic variables, including growth
