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Question -

Would the central bank need tointervene in a managed floating system? Explain why?



Answer -

  1.  In a managed floating system a central bank of a country has freedom to bring change in the exchange rate within certain limits.
  2. A country is allowed after information to the IMF to bring a certain limited amount of change in the rate of exchange.
  3.  A central bank cannot bring change in its exchange rate by more than 10%. For it, permission of IMF is necessary.

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