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Open Economy Macroeconomics — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsOpen Economy Macroeconomics2 Marks
Question
Explain the meaning of Managed Floating Exchange Rate.
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Answer

Managed floating exchange rate is the flexible exchange rate with intervention by the central bank through the market for foreign exchange to reduce fluctuations in the rate. When foreign exchange rate is too high, the central bank starts selling the foreign currency from its reserves. When it is too low central bank starts buying foreign currency in the market.

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