An exchange rate system under which currencies are allowed to fluctuate with frequent interventions by central banks is called a
A) freely floating system.
B) fixed system.
C) managed floating system.
D) None of the above.

Question

Quizplus · Accepted Answer

A managed floating system is a type of exchange rate system in which the exchange rate is allowed to fluctuate, but central banks intervene in the market to influence the direction or rate of the currency's movement. This is in contrast to a freely floating system, where the exchange rate is driven entirely by supply and demand and central bank intervention is minimal, or a fixed system, where the exchange rate is set at a certain level and maintained through central bank actions.

An Exchange Rate System Under Which Currencies Are Allowed to Fluctuate