Which of the following statements is true of a dirty float?
A)exchange rates fluctuate with occasional central bank intervention
B)beneficial exchange rates are offered in trade with certain nations
C)fixed exchange rates are set and maintained by the World Bank
D)currency values rise and fall according to the U.S. dollar

Question

Quizplus · Accepted Answer

A dirty float is a system in which a country's exchange rate is allowed to fluctuate according to the forces of supply and demand in the foreign exchange market, with occasional central bank intervention to prevent excessive volatility. This allows the exchange rate to adjust to market conditions, but also provides some stability through occasional intervention by the central bank. Beneficial exchange rates offered in trade with certain nations and fixed exchange rates set and maintained by the World Bank are not characteristics of a dirty float. Currency values may be influenced by the U.S. dollar, but this is not a defining feature of a dirty float.

Which of the Following Statements Is True of a Dirty