Question

Which of the following statements is correct:

I. Managed float regime allows the currency to appreciate gradually over time within a limited range;

II. Free float can be characterised by supply and demand forces determining the exchange rate with possible interference from government;

III. According to linked exchange rate regime, one currency is directly linked to another one;

IV. The BIS is responsible for establishing exchange rate regimes in all participating countries;

V. Crawling peg regime allows the currency move within a defined band relative to another currency.

Select one:

a. All of the statement are correct

b. All of the statement are false

c. Only I is correct

d. Only I and V are correct

e. Only I, II, III and V are correct

f. Only II and V are correct

g. Only II and III are correct

h. Only III is correct

i. Only IV is correct

j. Only II is correct

k. Only II and IV are correct

Answer 1

1. The managed float allows the currency to fluctuate from day to day, so statement 1 is False.

2.Free float currency is a system where the Government intervention is non -existent. So, statemnt 2 is FALSE.

3. Statement 3 is correct.

4. The purpose of the BIS is to serve the Central banks in their goal of maintaining the monetary and financial stability.

5. Crawling peg currency allows a fixed exchange rate currency to fluctuate within a band or limit although it is pegged to another currency.

So, the correct option is option h.