In saying that the present system of ﬂoating exchange rates is managed, we mean that

Question

Quizplus · Accepted Answer

The present system of floating exchange rates is managed in the sense that central banks of various countries sometimes buy and sell foreign exchange to alter undesirable trends in exchange rates. This is often referred to as foreign exchange intervention. Option A is incorrect because allowing exchange rates to move freely does not affect borrowing privileges with the IMF. Option B is incorrect because the IMF allows currencies to fluctuate up to 15% from their par value. Option C is incorrect because the day-to-day determination of exchange rates is largely driven by market forces.

In Saying That the Present System of ﬂOating Exchange Rates