In saying that the present system of flexible exchange rates is managed we mean that:
A)countries which 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 buy and sell foreign exchange to smooth out short-term fluctuations or undesirable trends in exchange rates.

Question

Quizplus · Accepted Answer

The statement means that central banks intervene to manage exchange rates by buying or selling foreign exchange in order to stabilize or correct short-term fluctuations and trends. The other choices are incorrect because the IMF does not impose restrictions on exchange rate movements, and its officials do not determine exchange rates on a daily basis.

In Saying That the Present System of Flexible Exchange Rates