Which of the following is not a major disadvantages of a flexible exchange-rate system?

A) It is susceptible to wild swings in rates, causing high uncertainty and reduced trade.
B) It could drain the foreign-exchange reserves of a nation.
C) A depreciation of a nation's currency would worsen its terms of trade.
D) Wild swings in exchange rates may destabilize the domestic economy through the effects on the traded-goods sectors.

Flexible Exchange-Rate System

A currency valuation system where the value of a currency is allowed to fluctuate in response to foreign exchange market mechanisms.

Foreign-Exchange Reserves

Stockpiles of foreign currencies maintained by a nation’s central bank. Obtained when the central bank sells local currency in exchange for foreign currency in the foreign exchange market.

Terms of Trade

This refers to the ratio at which a country's exports are exchanged for its imports, influencing the country's economic health.