Question

a countries central bank will need to maintain official reserves under a. pure flexible exchange rate...

a countries central bank will need to maintain official reserves under

a. pure flexible exchange rate system

b. dirty flexible exchange rate system

c. fixed exchange rate system

d. both b and c

e. all of them

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Answer #1

Correct answer is option (d) Both b and c

Explanation;

As we know that under pure flexible exchange rate system, official reserves are maintained through free forces of market hence there will be no role of central bank but under fixed exchange rate system central bank need to maintain official reserves. Apart from under dirty flexible exchange rate system, central bank occasionally interfere in maintain official reserves.

Hence correct answer is option (d).

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