Plz explain international mobility of liquidity and optimum resource allocation as merits of flexible exchange rate?Decribe in brief as 3marks q.each?

Dear student,

The flexible exchange rate system is system where exchange rates are determined by market forces of demand and supply. It eliminates the need for official foreign exchange reserve that solve the problem of international liquidity. 
As the exchange rate is determined where demand of foreign exchange meets its supply, it plays a vital role in allocation of foreign exchange resources by adjusting relation between foreign and domestic prices in a flexible manner. It plays an important role in economic development and promote efficiency in resource allocation.


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