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okay here's a quite a common question on the economics of fixed versus a floating currency these kind of debates appear in essay questions and daily response assignments and also multiple choice so here's the question why might have fixed exchange rate system be preferred to a floating exchange rate why might fix exchange rates be preferred to floating exchange rates press the pause button when you're ready have a think about the question come back to me when you're ready with the right answer okay so what's the the main argument for having fixed versus floating exchange rates the correct answer to this question is d d option is the right answer there's greater stability in the currency which encourages trade and investment let's work through why a b and c are wrong actually it's with a floating exchange rate that you get a partial auto correction of a country's trade deficit of countries running a big current account deficit or trade deficit then the currency tends to depreciate uh w...
