The strongest argument in favor of fixed exchange-rates is:
A)the country's ability to use independent monetary policy to pursue internal balance.
B)that floating exchange rates are often very volatile, disrupting international trade.
C)the ease of defending fixed exchange rates during speculative attacks.
D)that a fixed exchange rate allows unrestricted flow of financial capital from and into a country.

Question

Quizplus · Accepted Answer

The strongest argument in favor of fixed exchange rates is that floating exchange rates are often very volatile, disrupting international trade. Fixed exchange rates provide stability in foreign exchange markets which encourages trade and investment. However, fixed exchange rates also limit a country's ability to pursue independent monetary policy and defend against speculative attacks.

The Strongest Argument in Favor of Fixed Exchange-Rates Is