Question

(True or False) Floating exchange rates, like the U.S., are better than fixed exchange rates, like China.

Answer 1

True

Because

floating exchange rates are that they leave the monetary and physical authorities free to pursue internal goals. Such as full employment stable growth and price stability and exchange rate adjustment often works as an automatic stabilizer to promote those goals. Because of floating exchange rate no need for international management of exchange rates. No need for frequent Central Bank intervention. No need for elaborate capital flow restrictions. It Generate insulation from other countries economic problems. And because of above reason floating exchange rate like the US are better than fixed exchange rates like China.