Read the two statements and choose the correct option.
I. Under managed floating, the central bank intervenes only to smooth sharp swings, not to fix a rate.
II. Managed floating needs no foreign exchange reserves at all.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

The aim is to limit volatility, not to defend a fixed level. I is true.
Intervening means buying and selling dollars, which needs reserves. II is false.

Ten questions from Foreign Exchange Rate, at your own pace.

Ten questions from Foreign Exchange Rate, at your own pace.

Read the two statements and choose the correct option.I. Under managed floating, the central bank intervenes only to smooth sharp swings, not to fix a rate.II. Managed floating needs no foreign exchange reserves at all.