A 'Floating Exchange Rate System' Is One in Which

question 115

Multiple Choice

A 'floating exchange rate system' is one in which:

• A)the central bank intervenes in the currency exchange market to influence, but not fix, the exchange rate.
• B)trading firms establish the exchange rates for individual transactions in the foreign exchange market.
• C)the central bank allows private banks to manage their exchange rates.
• D)the central bank intervenes in the currency exchange market to fix the exchange rate.

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Definitions:

Trade Freedom

A measure of the absence of trade barriers that affect imports and exports, such as tariffs and quotas.

Fiscal Freedom

The degree to which individuals and businesses control their own economic resources, including the policies and laws that influence taxation and government spending.

Tariff

A tax imposed by a government on imported or, less commonly, exported goods to control trade volumes, protect domestic industries, or generate revenue.

Macropolitical Risk

The risk of losing money or facing instability due to political changes or instability at a country-wide level, affecting investment and business operations.