One Advantage of a Managed Float Exchange Rate System Compared

question 45

Multiple Choice

One advantage of a managed float exchange rate system compared to a floating exchange rate system is

• A) it allows the exchange rate to reflect demand and supply in the market.
• B) there is no need for government intervention.
• C) it allows greater exchange rate stability.
• D) it eliminates the possibility of depreciation during a recession.

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Definitions:

Excise Tax

A tax levied on specific goods, services, or transactions, often with the aim of reducing their consumption or raising revenue.

Imported Items

Goods brought into a country from abroad for sale.

Tariff

A tax imposed by a government on goods and services imported from other countries to protect domestic industries or to generate revenue.

Import Quotas

Limits set by a government on the amount or value of certain goods that can be imported into a country, usually to protect domestic industries.