Question5 An exchange rate regime where the domestic currency relative to a foreign currency is held within a defined band is termed as ______________. a managed float a free float a pegged exchange rate a brokered exchange rate a fixed exchange rate ResetMaximum marks: 1 Flag question undefined

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BlackTom AI · Accepted Answer

Let's examine each option in turn to see which one matches the description given in the question.
Option 1: 'a managed float' — A managed float (also called a dirty float) involves a currency whose value is largely determined by market forces but where the central bank occasionally intervenes to influence the rate. It is not confined to a fixed band, so it does not fit the description of being held within a defined band.
Option 2: 'a free float' — In a free float regime, the domestic currency is allowed to move freely in response to market supply and demand without intervention or a defined band. Since the question specifies a defined band, this option is incorrect.
Option 3: 'a pegged exchange rate' — A pegged or fixed exchange rate regime fixes the domestic currency's value to another currency (or basket) and typically keeps it within a narrow band around the target rate. The key feature here is the defined band within which the currency is maintained, which exactly matches the description in the question.
Option 4: 'a brokered exchange rate' — A brokered exchange rate is not a standard regime designation; it refers to a specific mechanism or market arrangement rather than a formal regime with a band. This does not describe a rate held within a defined band.
Option 5: 'a fixed exchange rate' — While this implies little or no movement relative to the reference, many fixed regimes imply a fixed value rather than a band around a target. The phrase 'defined band' suggests a pegged system with tolerance limits rather than a perfectly fixed rate, but in common terminology, 'pegged exchange rate' more precisely captures the banded stabilization mechanism described.
Collectively, the description best aligns with the concept of a pegged exchange rate, which explicitly involves maintaining the domestic currency within a specified band around a target rate.

Question5 An exchange rate regime where the domestic currency relative to a foreign currency is held within a defined band is termed as ______________. a managed float a free float a pegged exchange rate a brokered exchange rate a fixed exchange rate ResetMaximum marks: 1 Flag question undefined

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Question5 An exchange rate regime where the domestic currency relative to a foreign currency is held within a defined band is termed as ______________. a managed float a free float a pegged exchange rate a brokered exchange rate a fixed exchange rate ResetMaximum marks: 1 Flag question undefined

View Explanation

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