What system was created to avoid the disadvantage of relatively large changes in par values and possibly destabilizing speculation?
A)Currency board arrangements
B)Adjustable peg system
C)Crawling peg system
D)Managed floating exchange rate system

Question

Quizplus · Accepted Answer

The crawling peg system was created to avoid the disadvantage of relatively large changes in par values and possibly destabilizing speculation. Under this system, a country's exchange rate is allowed to fluctuate within certain bands or margins against a specified reference currency or a basket of currencies. However, the central bank intervenes in the foreign exchange market to keep the exchange rate within these bands and adjusts the official par value of the currency periodically to reflect changes in economic fundamentals. This allows for gradual and smooth adjustments in the exchange rate, avoiding abrupt and disruptive changes.

What System Was Created to Avoid the Disadvantage of Relatively