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Question
The managed floating system is a combination of ______
Options
fixed exchange rate systems
floating exchange rate systems
Both fixed exchange rate systems and floating exchange rate systems
none of the above
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Solution
The managed floating system is a combination of Both fixed exchange rate systems and floating exchange rate systems
Explanation:
A managed floating system combines the advantages of both fixed and floating exchange rate regimes. It asks for the government or the central bank to intervene if the situation warrants it. By buying and selling foreign currency, the government or the central bank aids in the stabilisation of exchange rates. As a result, in order to avoid dirty floating, the government uses its ability to intervene whenever necessary.
