Which of the following is an advantage of a flexible exchange rate regime?
A. Automatic adjustment mechanism for balance of payments disequilibria
B. No need for any foreign exchange reserves
C. Elimination of all exchange rate volatility
D. Complete insulation from all external shocks
Answer: Option A
Solution (By JKSSB Mock Tests)
Under flexible exchange rates, the currency appreciates or depreciates automatically in response to balance of payments pressures, helping to restore equilibrium.
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