Economics (AS & A Level) · Feb / March 2021 · Paper 12 · Question 21
9708Exchange rates
A country replaces a floating exchange rate system with a managed floating exchange rate system. Which statement is correct?
- AIts central bank would have to intervene more frequently in the foreign exchange market.
- BIts central bank would need to hold fewer foreign currency reserves.
- CThe value of its currency would be determined by its major trading partners.
- DThe value of its currency would be determined by the value of the US dollar.
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Correct answer: A. Its central bank would have to intervene more frequently in the foreign exchange market.
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