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Two friends Mira and Sindhu were discussing the exchange rate systems. ‘Under this system, the exchange rates are determined by the market forces of demand and supply. However, deliberate efforts are made by the competent authority to keep the exchange rates within a specific range’.
The above-mentioned statement was given by Sindhu, identify the type of exchange rate system was she talking about?
The above-mentioned statement was given by Sindhu, identify the type of exchange rate system was she talking about?
- a)Fixed Exchange Rate
- b)Floating Exchange Rate
- c)Managed Floating Exchange Rate
- d)Managed Fixed Exchange Rate
Correct answer is option 'C'. Can you explain this answer?
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Two friends Mira and Sindhu were discussing the exchange rate systems....
The type of exchange rate that Sindhu is talking about is ‘Managed floating exchange rate’. In this type of exchange rate, with the help of market forces of demand and supply, exchange rate is determined. And competent authority, i.e., country’s central bank intervenes so as to maintain the exchange rate within a specific range. Central bank also keeps reserves of foreign exchange within the targeted value. Managed floating exchange rate is also called as ‘Dirty floating’.
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Two friends Mira and Sindhu were discussing the exchange rate systems....
Mira: Hey Sindhu, have you heard about the different exchange rate systems used by countries?
Sindhu: Yes, I have. There are mainly three types of exchange rate systems - fixed, floating, and managed exchange rate systems.
Mira: That's right. In a fixed exchange rate system, the value of a country's currency is fixed to another currency or a basket of currencies. The central bank intervenes to maintain this fixed rate.
Sindhu: Yes, and this system is often used by smaller economies or countries with unstable currencies. It provides stability in international trade and investment.
Mira: Exactly. On the other hand, in a floating exchange rate system, the value of a country's currency is determined by market forces of supply and demand. The central bank does not intervene in this system.
Sindhu: That's true. The exchange rate in a floating system can fluctuate daily, depending on various economic factors like inflation, interest rates, and political stability.
Mira: And then there's the managed exchange rate system, which is a combination of fixed and floating systems. The central bank allows the currency to float within a certain range and intervenes when necessary to maintain stability.
Sindhu: Yes, this system is often used when a country wants to have some control over its exchange rate but also wants to allow market forces to play a role.
Mira: Right. It's interesting how different countries choose different exchange rate systems based on their economic and political goals.
Sindhu: Definitely. It's important to understand these systems to analyze how they impact international trade, investment, and economic stability.
Sindhu: Yes, I have. There are mainly three types of exchange rate systems - fixed, floating, and managed exchange rate systems.
Mira: That's right. In a fixed exchange rate system, the value of a country's currency is fixed to another currency or a basket of currencies. The central bank intervenes to maintain this fixed rate.
Sindhu: Yes, and this system is often used by smaller economies or countries with unstable currencies. It provides stability in international trade and investment.
Mira: Exactly. On the other hand, in a floating exchange rate system, the value of a country's currency is determined by market forces of supply and demand. The central bank does not intervene in this system.
Sindhu: That's true. The exchange rate in a floating system can fluctuate daily, depending on various economic factors like inflation, interest rates, and political stability.
Mira: And then there's the managed exchange rate system, which is a combination of fixed and floating systems. The central bank allows the currency to float within a certain range and intervenes when necessary to maintain stability.
Sindhu: Yes, this system is often used when a country wants to have some control over its exchange rate but also wants to allow market forces to play a role.
Mira: Right. It's interesting how different countries choose different exchange rate systems based on their economic and political goals.
Sindhu: Definitely. It's important to understand these systems to analyze how they impact international trade, investment, and economic stability.
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Two friends Mira and Sindhu were discussing the exchange rate systems....
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Two friends Mira and Sindhu were discussing the exchange rate systems. ‘Under this system, the exchange rates are determined by the market forces of demand and supply. However, deliberate efforts are made by the competent authority to keep the exchange rates within a specific range’.The above-mentioned statement was given by Sindhu, identify the type of exchange rate system was she talking about?a)Fixed Exchange Rateb)Floating Exchange Ratec)Managed Floating Exchange Rated)Managed Fixed Exchange RateCorrect answer is option 'C'. Can you explain this answer?
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Two friends Mira and Sindhu were discussing the exchange rate systems. ‘Under this system, the exchange rates are determined by the market forces of demand and supply. However, deliberate efforts are made by the competent authority to keep the exchange rates within a specific range’.The above-mentioned statement was given by Sindhu, identify the type of exchange rate system was she talking about?a)Fixed Exchange Rateb)Floating Exchange Ratec)Managed Floating Exchange Rated)Managed Fixed Exchange RateCorrect answer is option 'C'. Can you explain this answer? for Class 12 2024 is part of Class 12 preparation. The Question and answers have been prepared according to the Class 12 exam syllabus. Information about Two friends Mira and Sindhu were discussing the exchange rate systems. ‘Under this system, the exchange rates are determined by the market forces of demand and supply. However, deliberate efforts are made by the competent authority to keep the exchange rates within a specific range’.The above-mentioned statement was given by Sindhu, identify the type of exchange rate system was she talking about?a)Fixed Exchange Rateb)Floating Exchange Ratec)Managed Floating Exchange Rated)Managed Fixed Exchange RateCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Class 12 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Two friends Mira and Sindhu were discussing the exchange rate systems. ‘Under this system, the exchange rates are determined by the market forces of demand and supply. However, deliberate efforts are made by the competent authority to keep the exchange rates within a specific range’.The above-mentioned statement was given by Sindhu, identify the type of exchange rate system was she talking about?a)Fixed Exchange Rateb)Floating Exchange Ratec)Managed Floating Exchange Rated)Managed Fixed Exchange RateCorrect answer is option 'C'. Can you explain this answer?.
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