Question

The managed floating system is a combination of ______ 

Options

• fixed exchange rate systems 

• floating exchange rate systems 

• Both fixed exchange rate systems and floating exchange rate systems  

• none of the above

Answer 1

The managed floating system is a combination of Both fixed exchange rate systems and floating exchange rate systems  

Explanation:

A managed floating system combines the advantages of both fixed and floating exchange rate regimes. It asks for the government or the central bank to intervene if the situation warrants it. By buying and selling foreign currency, the government or the central bank aids in the stabilisation of exchange rates. As a result, in order to avoid dirty floating, the government uses its ability to intervene whenever necessary.