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

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsOpen Economy Macroeconomics3 Marks
Question
Would the Central Bank need to intervene in managed floating system? Explain why?
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Answer

Managed floating system is a mixture of two systems of exchange, i.e. fixed exchange rate system and flexible exchange rate system. In this system, the Central Bank can intervene to purchase or sell foreign currencies in an effort to moderate exchange rate movements, whenever they feel such actions are appropriate.

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