ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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under this exchange rate does not remain within the desired limits
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market exchange rate is influenced by the sale & purchase of foreign currency in the international money market
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govt does not intervene to manage the exchange rate in this system
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all of these
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Detailed explanation-1: -The correct answer is option 3, i.e. Managed floating exchange rate system. In the Managed floating exchange rate system, the foreign exchange rate is determined by the market forces and the central bank influences the exchange rate through involvement in the foreign exchange market.
Detailed explanation-2: -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-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: -In a floating regime, exchange rates are generally determined by the market forces of supply and demand for foreign exchange.
Detailed explanation-5: -Which of the following is true of a floating exchange rate policy? Governments believe in the free market and allow it to determine exchange rates.