ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A managed floating exchange rate is an exchange rate system that allows a nation’s central bank to intervene regularly in foreign exchange markets to change the direction of the currency’s float and/or reduce the amount of currency volatility. This exchange rate system is also known as a “dirty float”.

Detailed explanation-2: -The flexible exchange rate system is also called the floating exchange rate system.

Detailed explanation-3: -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-4: -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-5: -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.