Problem
1. The United States has allowed the dollar to float since 1973, yet the United States has reported large balance-of-payments deficits on a reserve settlements basis. What is the explanation for this apparent paradox?
2. "If nations have different rates of inflation, then exchange rates between their currencies cannot remain fixed." Do you agree? Explain.
3. What are the principal arguments against a system of floating exchange rates? How do these stand up in the light of experience with floating rates since 1973?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.