A Major Advantage of the System of Flexible Exchange Rates

Multiple Choice

A major advantage of the system of flexible exchange rates (as opposed to fixed exchange rates) is commonly thought to be

A) the likelihood that external monetary shocks will not influence domestic national Income under flexible exchange rates.
B) the strong possibility that the greater exchange rate risk under flexible rates will Increase the volume of international trade.
C) the enhanced effectiveness of monetary policy in influencing national income under Flexible exchange rates.
D) the "virtuous circle" that flexible rates can bring between depreciation and inflation.