Question

Read the following statements carefully:
Statement-1: Managed floating exchange rate system is an amalgamation of fixed and flexible exchange rate system.
Statement-2: Managed floating exchange rate system is also known as ‘hybrid system’.
In the light of the given statements, choose the correct option from the following:

• A. Statement 1 is true and Statement 2 is false.
• B. Statement 1 is false and Statement 2 is true.
• C. Both Statements 1 and 2 are true.
• D. Both Statements 1 and 2 are false.

Hint:

‘Managed floating’ = mix of fixed + flexible rates, also termed a ‘hybrid system’.

Answer 1

The Correct Option is C

A managed floating exchange rate system is a system that combines elements of both fixed and flexible exchange rates, hence called a ‘hybrid system’. The central bank intervenes when necessary to stabilize the currency. Therefore, both statements are correct.