In an _________ exchange rate system, the foreign exchange market is totally free from government intervention
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Step 1: In a floating exchange rate system, the foreign exchange market is totally free from government intervention. Show more…
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In a fixed exchange rate system, a government intervenes to maintain the value of her currency at a fixed (target) value. Suppose that the equilibrium price (from the foreign exchange market) for the country’s currency is below the target rate that the government is trying to achieve. How should the government intervene in the currency market?
Akash M.
fixed exchange rate system
Rashmi S.
In fixed exchange rate policy, the exchange rate is determined by the market forces of demand and supply of domestic/foreign currencies. the central bank and the latter will intervene in the foreign exchange rate market by buying or selling domestic/foreign currencies to keep the exchange fixed at a pre-determined level. changes in interest rates. changes in the price level.
Aparna S.
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Principles of Microeconomics for AP® Courses
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