Which of the Following Is a Disadvantage of a Free-Floating

Multiple Choice

Which of the following is a disadvantage of a free-floating exchange rate system?

A) A free-floating exchange rate system reduces the effectiveness of a country's monetary policy and increases the variability of inflation.
B) Under a system of free-floating exchange rates, a nation will, over the long run, experience more deficits than surpluses in its balance of payments.
C) Fluctuating exchange rates make international transactions riskier and thus increase the cost of doing business with other countries.
D) A free-floating exchange rate amplifies the impact of international events on an economy.