Which of the following is a major advantage of a flexible exchange rate system?
A. Elimination of all speculation
B. Automatic adjustment of balance of payments
C. No need for foreign exchange reserves
D. Complete insulation from external shocks
Answer: Option B
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:
Information goods and digital products typically have high fixed costs of production but near-zero marginal costs of reproduction and distribution, creating distinctive pricing and competition issues.
Explanation:
The trilemma states that only two of the three policy goals—exchange-rate stability, capital-market openness and monetary independence—can be achieved at the same time.
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