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Economics (AS & A Level) · May / June 2024 · Paper 11 · Question 24

9708Exchange rates

What is a disadvantage of operating a floating exchange rate system?

  1. AIt makes it difficult to prioritise domestic economic policy aims.
  2. BIt makes the prices of internationally traded goods less predictable.
  3. CIt means that the government must keep significant foreign currency reserves.
  4. DIt requires continuous government intervention in currency markets.

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Correct answer: B. It makes the prices of internationally traded goods less predictable.

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