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Question
“Considering the depreciation of Indian Currency (₹) in the international market, the Reserve Bank of India (RBI) has decided to purchase Indian currency (₹) in the open market.”
This represents ______ exchange rate system.
Options
fixed
flexible
managed floating
manipulated
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Solution
“Considering the depreciation of Indian Currency (₹) in the international market, the Reserve Bank of India (RBI) has decided to purchase Indian currency (₹) in the open market.”
This represents managed floating exchange rate system.
Explanation:
Managed floating occurs when the RBI occasionally intervenes in the open market by purchasing and selling Indian currency in order to influence the foreign exchange rate. A managed floating exchange rate system's principal purpose is to reconcile the benefits of exchange rate flexibility with the necessity for exchange rate stability.
