Which one of the following is NOT an alleged disadvantage of a flexible exchange rate system?
A) possibility of destabilizing speculation
B) wasteful resource movements between industries
C) increased need for international reserves
D) danger of a "vicious circle" between inflation in a country and depreciation of that Country's currency

Question

Quizplus · Accepted Answer

Increased need for international reserves is actually an alleged advantage of a flexible exchange rate system, as countries can rely on their reserves to stabilize their exchange rates in times of volatility. The other options - destabilizing speculation, wasteful resource movements, and the danger of a "vicious circle" between inflation and currency depreciation - are all alleged disadvantages of a flexible exchange rate system.

Which One of the Following Is NOT an Alleged Disadvantage