Question : Which of the following exchange rate systems allows for fluctuations in currency values but with some intervention by the central bank?
Option 1: Floating exchange rate
Option 2: Fixed exchange rate
Option 3: Pegged exchange rate
Option 4: Managed float exchange rate
Correct Answer: Managed float exchange rate
Solution : The correct answer is d) Managed float exchange rate
In a managed float exchange rate system, the currency's value is determined by market forces of supply and demand, allowing for fluctuations in currency values. However, the central bank intervenes in the foreign exchange market to influence or manage the exchange rate. The central bank may buy or sell its own currency to stabilize or influence its value in response to economic factors or policy objectives.
In a managed float exchange rate system, the central bank maintains a degree of flexibility in allowing the currency to fluctuate but also intervenes to prevent excessive volatility or to achieve certain economic goals, such as maintaining price stability or supporting export competitiveness.
Question : Which of the following exchange rate systems allows the exchange rate to be freely determined by market forces but with occasional central bank intervention?
Option 1: Crawling peg exchange rate
Option 3: Floating exchange rate
Question : Which of the following exchange rate systems is a combination of fixed and floating exchange rates, where the central bank occasionally intervenes in the foreign exchange market?
Option 1: Managed float exchange rate
Option 2: Pegged exchange rate
Option 3: Currency board arrangement
Option 4: Crawling peg exchange rate
Question : Which of the following is not a fixed exchange rate system?
Option 3: Managed float exchange rate
Option 4: Currency board arrangement
Question : Which of the following exchange rate systems allows the exchange rate to be determined solely by market forces of supply and demand?
Option 1: Fixed exchange rate
Option 2: Floating exchange rate
Option 4: Pegged exchange rate
Question : Which of the following exchange rate systems provides the highest level of exchange rate stability?
Option 2: Fixed exchange rate ‘
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