Which exchange rate mechanism in intended to insulate the balance of payments from short-term capital movements while providing exchange rate stability for commercial transactions ?
Correct answer: A. dual exchange rates
- A. dual exchange rates
- B. managed floating exchange rates
- C. adjustable pegged exchange rates
- D. crawling pegged exchange rates
Explanation
A dual exchange-rate system separates commercial transactions from financial transactions, allowing the commercial rate to remain stable while short-term capital flows are handled through another rate. This helps insulate the balance of payments from volatile capital movements.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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