Under a system of managed floating exchange rates, central banks intervene in the foreign exchange market to
A) moderate long run movements in exchange rates.
B) reinforce long run movements in exchange rates.
C) moderate short run fluctuations in exchange rates.
D) reinforced short run fluctuations in exchange rates.

Question

Quizplus · Accepted Answer

Managed floating exchange rates involve central bank intervention to moderate short run fluctuations in exchange rates. This is done in order to stabilize the economy and promote trade. However, long run movements in exchange rates are left to market forces.

Under a System of Managed Floating Exchange Rates, Central Banks