Question at position 24 A system in which currencies float against one another, with governments intervening to stabilize their currencies at particular target exchange rates is called a __.managed float systemlinked exchange-rate systemfree float systemfixed exchange-rate system

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BlackTom AI · Accepted Answer

To approach this question, we first recall the terminology used in exchange-rate regimes and how governments intervene in currency markets.
Option 1: 'managed float system' — This describes a regime where currencies are allowed to float freely, but governments or central banks intervene periodically to influence the exchange rate, aiming to stabilize it around a target level. This matches the description given in the question exactly, where authorities intervene to stabilize currencies at particular target rates.
Option 2: 'linked exchange-rate system' — This would imply that currencies are tied or pegged to each other in a fixed ratio, effectively removing independent movement between them. The statement in the question does not describe a strict linkage or peg between currencies, but rather discretionary stabilization, so this option is incorrect.
Option 3: 'free float system' — In a free float (or clean float) system, currencies are driven by market forces with no deliberate governmental targeting of a specific exchange-rate level. Since the question emphasizes intervention to stabilize at target rates, this option does not fit.
Option 4: 'fixed exchange-rate system' — In a fixed system, a country commits to maintaining its currency at a set value relative to another currency or basket, with very substantial, ongoing government action to maintain the peg. The description here involves stabilization around targets but not a strict fixed peg, so the fixed-rate system is not the best match.
Thus, after evaluating all options, the analysis points toward the managed float system as the correct characterization of a regime where currencies float but governments intervene to stabilize them at targets.

Question at position 24 A system in which currencies float against one another, with governments intervening to stabilize their currencies at particular target exchange rates is called a __.managed float systemlinked exchange-rate systemfree float systemfixed exchange-rate system

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Question at position 24 A system in which currencies float against one another, with governments intervening to stabilize their currencies at particular target exchange rates is called a __.managed float systemlinked exchange-rate systemfree float systemfixed exchange-rate system

View Explanation

Log in for full answers

Similar Questions

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Question4 An exchange rate regime where the domestic currency relative to a foreign currency is held within a defined band is termed as ______________. a free float a managed float a fixed exchange rate a brokered exchange rate a pegged exchange rate ResetMaximum marks: 1 Flag question undefined

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Why does the LL schedule have a negative slope? The economic stability loss from pegging to the area's currencies _______ as the degree of economic interdependence _______.

Among the statements below pick the one which best describes current policy of different countries central banks with respect to exchange rate regimes. Select one – the most appropriate answer.

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