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Economics of Floating versus Fixed Exchange Rates

Level:
A-Level, IB Diploma
Board:
AQA, Edexcel, Eduqas, IB, OCR, WJEC

Last updated 14 Nov 2022

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This revision video looks at fixed, managed floating and fixed exchange rates and considers some of the advantages / drawbacks of each choice of currency system.

Choice of currency system is one of the most important decisions that a government takes when operating macroeconomic policy. The UK for example operates a free floating currency whereas Denmark fixes their currency (the Krone) against the Euro and the Bahamas fixed against the US dollar.

Exchange rate systems
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