ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Fixed System of exchange rate
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Flexible system of exchange rate
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Bathe a and b
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None of these
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Detailed explanation-1: -A dirty float is a floating exchange rate where a country’s central bank occasionally intervenes to change the direction or the pace of change of a country’s currency value. A dirty float is also known as a “managed float."
Detailed explanation-2: -A dirty float occurs when government’s monetary rules or laws affect the pricing of its currency. With a dirty float, the exchange rate is allowed to fluctuate on the open market, but the central bank can intervene to keep it within a certain range, or prevent it from trending in an unfavorable direction.
Detailed explanation-3: -A floating exchange rate is also known as a flexible exchange rate, and changes according to supply and demand. This means if the demand for a currency is low or it’s widely available it’s value goes down, and conversely if it’s in demand or short supply, it’s value goes up – and with it the exchange rate.
Detailed explanation-4: -The flexible exchange rate system is also called the floating exchange rate system.
Detailed explanation-5: -A floating exchange rate is determined by the private market through supply and demand.