A clean floating exchange rate policy is a government policy to _____.
A) set exchange rates purely on the basis of supply and demand
B) allow a currency's value to fluctuate according to the foreign exchange rate
C) allow selective government intervention in determining the exchange rate
D) link the exchange rate of a currency to the gold standard

Question

A clean floating exchange rate policy is a government policy to _____.
A) set exchange rates purely on the basis of supply and demand 
B) allow a currency's value to fluctuate according to the foreign exchange rate 
C) allow selective government intervention in determining the exchange rate 
D) link the exchange rate of a currency to the gold standard

Quizplus · Accepted Answer

A clean floating exchange rate policy means that the government allows the currency's value to fluctuate according to the foreign exchange rate, based purely on supply and demand in the foreign exchange market. There is no selective government intervention or link to the gold standard in this policy.

A Clean Floating Exchange Rate Policy Is a Government Policy