Fixed Exchange Rate
Examine the advantages & disadvantages of fixed exchange rate and freefloating exchange rates. Discuss the long term balance of payment problems under fixed exchange rates.
Advantages of fixed rates:
- Promotes international trade.
- neccessary for small nations.
- Promotes international investment.
- promoves speculation.
- necessary for developing.
Disadvantages of fixed exchnage;
- outmoded system.
- discourage foreign investment
- monetary dependence
- cost-price relationship not reflcted
- not a genuinely fixed system.
- Assignment; Max word length: 1,000 words
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