Question

What are the merits and demerits of flexible and fixed exchange rate system?

Answer 1

Answer:

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Answer 2

Merits of Flexible Exchange Rates System:

1. Problems of Undervaluation and Overvaluation are Avoided
2. Promotes Growth of Multilateral Trade
3. Flexible Exchange Rates does not Necessarily Show Large Fluctuations
4. It Ensures Individual Freedom
5. It Frees the Government from Problems of Balance of Payments