Exchange Rate Flashcards
1
Q
Define floating exchange rate
A
A system whereby the price of one currency in terms of another is determined by the forces of demand and supply
2
Q
Define dirty float/managed/semi-fixed exchange rate
A
A system whereby the exchange rate is allowed to float freely within a permitted band
Intervention only occurs when the exchange rate reaches the upper or lower limits
3
Q
Define fixed exchange rate
A
System whereby the price of one currency in terms of another is set at a specific rate and this rate is maintained by the government/central bank/monetary authority
