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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