Which one of the following represents the dirty floating exchange rate system?
Which one of the following represents the dirty floating exchange rate system?
Solution
✅ Correct Option: 3
Dirty or managed floating lies between flexible and fixed systems: the exchange rate is broadly market determined, but central banks intervene by buying and selling foreign currency to moderate sharp movements. Option 1 describes a purely flexible system, option 2 a fixed system, and option 4 the general function of exchange rates.
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