Advertisements
Advertisements
प्रश्न
Answer the following question.
Explain the distinction between the flexible exchange rate and the managed floating exchange rate.
उत्तर
| Basis of Difference | Flexible Exchange Rate | Managed Floating Exchange Rate |
| Meaning/ Determination | Exchange rate determined by the demand and supply forces only. | Exchange rate determined by forces of demand and supply with occasional government intervention. |
| Name | It is also called free exchange rate system | It is also called dirty floating system. |
| Fluctuations | As it is determined by demand and supply forces, it is prone to more fluctuations. | Comparatively less fluctuations as government intervenes to ensure that the rate does not vary much. |
| Government intervention | No intervention | Government intervenes by selling or purchasing foreign currency in the international market. |
| Predictability of Trade | Unpredictable as the exchange rate is flexible in nature. | Comparatively more predictable as the variations in exchange rates are governed by the monetary authorities. |
APPEARS IN
संबंधित प्रश्न
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?
“Considering the depreciation of Indian Currency (₹) in the international market, the Reserve Bank of India (RBI) has decided to purchase Indian currency (₹) in the open market.”
This represents ______ exchange rate system.
