Because Greece is a member of the European Union, it has to trade using the same exchange rate, linked to the euro, as stronger economies like Germany. Greece also has a continuing balance of payments deficit. How would moving to a floating exchange rate help Greece?
- AExchange rates will be less volatile which encourages international investment.
- BIts currency should be less open to attacks by international speculators.
- CIts currency would be allowed to depreciate which will make its exports more competitive.
- DThe value of its exports and imports will automatically balance.