Asked by Abbie Mulbarger on Jul 25, 2024
Verified
In saying that the present system of floating exchange rates is managed, we mean that
A) countries that allow their exchange rate to move freely will lose their borrowing privileges with the IMF.
B) the value of any IMF member's currency can only vary 2 percent from its par value.
C) IMF officials determine exchange rates on a day-to-day basis.
D) the central banks of various countries sometimes buy and sell foreign exchange to alter undesirable trends in exchange rates.
Floating Exchange Rates
Currency values that fluctuate in response to the foreign exchange market without intervention by government or central banks.
Central Banks
The principal monetary authority responsible for overseeing the monetary system, issuing currency, and implementing economic policies of a country or monetary union.
IMF
International Monetary Fund, an international organization aiming to foster global monetary cooperation, secure financial stability, and facilitate international trade.
- Discern the mechanisms of varying exchange rate structures, like floating, fixed, and managed floating, and their repercussions on international trading patterns and the constancy of currencies.
- Understand the intervention strategies central banks use to influence exchange rates in a managed float system.
Verified Answer
Learning Objectives
- Discern the mechanisms of varying exchange rate structures, like floating, fixed, and managed floating, and their repercussions on international trading patterns and the constancy of currencies.
- Understand the intervention strategies central banks use to influence exchange rates in a managed float system.
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