5. Fixed versus floating exchange rates Aa Aa ? In Israel, the exchange rate is

Question

5. Fixed versus floating exchange rates Aa Aa ? In Israel, the exchange rate is determined by the market, and the government makes no attempt to determine its level. This is an example of a Which of the following statements regarding fixed exchange rates is true? Check all that apply. ? An important benefit of a fixed exchange rate is that it reduces uncertainty regarding the future value of a currency. Governments are often able to maintain target exchange rates by using monetary policy to influence supply and demand in the foreign-exchange market

Explanation / Answer

5. This is an example of floating exchange rate. In this regime market forces determine exchange rate.

Both statements are correct

Governement can use open market operations to keep the exchange rate fixed which reduces .volatility of the currency.

6) All statements are correct.

It is managed by a group of member countries. To get financial aid one has to be the member of the organisation and there is subscription fee for that. IMF grants loans to countires who are in need to be rescued.

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