________ keeps the exchange rate fixed in the short run but then adjusts its value at regular intervals to account for supply and demand pressures.

Question

Quizplus · Accepted Answer

A crawling peg system keeps the exchange rate fixed in the short run but allows for adjustments in response to supply and demand pressures by periodically changing the exchange rate at a predetermined rate or in response to certain economic indicators. A crawling float system, on the other hand, allows for a more flexible exchange rate that adjusts to market forces without any predetermined rate or target. The European Monetary System used to have a fixed exchange rate system but has since transitioned to a managed floating system. Therefore, the best choice is a crawling peg.

________ Keeps the Exchange Rate Fixed in the Short Run