Floating exchange rate Pros
The secret to scoring awesome grades in economics is to have corresponding awesome notes.
A common pitfall for students is to lose themselves in a sea of notes: personal notes, teacher notes, online notes textbooks, etc... This happens when one has too many sources to revise from! Why not solve this problem by having one reliable source of notes? This is where we can help.
What makes TooLazyToStudy notes different?
are clear and concise and relevant
is set in an engaging template to facilitate memorisation
cover all the important topics in the O level, AS level and A level syllabus
are editable, feel free to make additions or to rephrase sentences in your own words!
Looking for live explanations of these notes? Enrol now for FREE tuition!
The exchange rate should, in theory, move to restore a balance on the current account of the balance of payments.
For instance, if a country has a current account deficit, demand for the currency will fall while its supply increases. This will lead to a depreciation, making exports cheaper and imports more expensive.
Insulation from external economic events.
A country is not tied to a possibly unacceptably high world inflation rate, (as it is under a fixed exchange rate). It can choose its own inflation target
With the government not influencing the value of the exchange rate, reserves of foreign currency do not have to be held and can be used for other purposes.
The exchange rate is not a government target and so the government can concentrate on other aims.