Which exchange rate system does not require monetary reserves for official exchange rate intervention ?
Correct answer: A. floating exchange rates
- A. floating exchange rates
- B. pegged exchanged rates
- C. managed floating exchange rates
- D. dual exchange rates
Explanation
Under a freely floating exchange-rate system, market forces determine the rate, so the central bank does not need to use foreign-exchange reserves for official intervention. Pegged and managed systems generally require reserves to defend or influence the rate.
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