The basic type of intervention by central banks under the managed ﬂoating exchange rate system is to
A) readjust the peg for exchange rates.
B) buy and sell currencies to inﬂuence supply and demand for foreign exchange.
C) renegotiate the rate at which foreign currencies can be converted into gold.
D) make pronouncements but then do nothing and let the market set the exchange rate.

Question

Quizplus · Accepted Answer

Under the managed floating exchange rate system, central banks intervene in the foreign exchange market by buying and selling currencies to influence the supply and demand, ultimately affecting the exchange rate. The other options are not typical interventions under this system.

The Basic Type of Intervention by Central Banks Under the Managed