Which of the following is a major advantage of a flexible exchange rate system?
A. Automatic adjustment of balance of payments
B. Elimination of all speculation
C. No need for foreign exchange reserves
D. Complete insulation from external shocks
Answer: Option A
Solution (By JKSSB Mock Tests)
Under a flexible exchange rate system, the exchange rate adjusts automatically to equilibrate the demand and supply of foreign exchange, helping to correct balance of payments imbalances.
Explanation:
The FRBM Act requires the government to present a Medium Term Fiscal Policy Statement, Fiscal Policy Strategy Statement and Macroeconomic Framework Statement.
Explanation:
Keynes introduced the concept of effective demand, which is the level of aggregate demand that is equal to aggregate supply and determines the level of employment and output.
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