Question

Proponents of a fixed exchange rate system point out that a major drawback of a floating exchange rate is that it ___. (3 points)

Answer 1

Answer:

e) leads to uncertainty about the value of goods traded internationally

Explanation:

When a currency has a floating exchange rate, its real value changes on a day-to-day basis. When that happens constantly, traders involved in international business become uncertain about the value of their goods when they step into a foreign market.

When a currency has a fixed exchange rate, that will rarely be a problem.