When the exchange rate of foreign currency increases due to managed floating rate it is known as_______.

Option 1: Devaluation -> Official reduction of domestic currency value by authorities.

Option 2: Depriciation -> Market-driven decline in currency value (not official action).

Option 3: Appreciation -> Increase in currency value (opposite of what's described).

Option 4: Revaluation -> Official increase in domestic currency value (opposite direction).

Hence, Devaluation -> In a managed floating rate system, when monetary authorities deliberately intervene to reduce the value of the domestic currency (making foreign currency more expensive), it is called devaluation. This is an official policy action, unlike depreciation which is market-driven. When the exchange rate of foreign currency increases, it means more domestic currency is needed to purchase foreign currency, indicating the domestic currency has been devalued -> correct

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