The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4

-Assume that a country's government influences the exchange rate through active central bank intervention, with no pre-announced path for the exchange rate. This policy is known as a(n):
A)floating exchange-rate policy.
B)managed floating exchange-rate policy.
C)fixed exchange-rate policy.
D)crawling-peg exchange-rate policy.
E)interventionist exchange-rate policy.

Question

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4
 
-Assume that a country's government influences the exchange rate through active central bank intervention, with no pre-announced path for the exchange rate. This policy is known as a(n):
A)floating exchange-rate policy. 
B)managed floating exchange-rate policy. 
C)fixed exchange-rate policy. 
D)crawling-peg exchange-rate policy. 
E)interventionist exchange-rate policy.

Quizplus · Accepted Answer

A managed floating exchange-rate policy involves active central bank intervention in the foreign exchange market to influence the exchange rate, but with no pre-announced path for the rate. This is the closest match to the policy described in the question. The other options do not fit the description, as a floating exchange-rate policy allows the exchange rate to be determined by market forces, a fixed exchange-rate policy fixes the rate to a specific value, a crawling-peg policy involves pre-announced adjustments to the rate, and an interventionist policy is a broad category that could encompass any of these options.

The Figure Below Shows the Demand (D) and Supply (S)