ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Managed floating exchange rate system is the amalgamation of the flexible exchange rate system and the fixed exchange rate system. Under this system, central banks intervene to buy and sell foreign currencies in an attempt to moderate exchange rate movements.

Detailed explanation-2: -Managed Exchange Rate system: It is the hybrid or mixture of fixed and flexible exchange rate system.

Detailed explanation-3: -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-4: -The correct answer is It is determined by the market forces of demand and supply. A floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies.

Detailed explanation-5: -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.