The policy of changing par values by small preannounced amounts at frequent intervals until the equilibrium exchange rate is reached is called:
A)crawling peg
B)adjustable peg
C)managed float
D)dirty float

Question

Quizplus · Accepted Answer

The policy of changing par values by small preannounced amounts at frequent intervals until the equilibrium exchange rate is reached is called crawling peg. Option A represents such a policy, whereas options B, C and D represent different exchange rate regimes. Adjustable peg refers to a fixed exchange rate system where the central bank periodically adjusts the par value of its currency to align with changing market conditions. Managed float refers to a floating exchange rate system where the central bank intervenes in the foreign exchange market to influence the exchange rate. Dirty float refers to a floating exchange rate system where the central bank intervenes in the foreign exchange market to maintain a desired exchange rate level without committing to a specific target or band.

The Policy of Changing Par Values by Small Preannounced Amounts