When the exchange rate fluctuates around a fixed central target,allowing for a moderate amount of fluctuation,while tying the currency to the target central rate,the exchange rate is under:
A)a horizontal band.
B)a crawling peg.
C)a managed float.
D)an independent float.
E)a currency board.

Question

Quizplus · Accepted Answer

A horizontal band is a system in which the exchange rate is allowed to fluctuate within a fixed range or band, while still being tied to a central target rate. This system allows for some flexibility in the exchange rate, but also provides a degree of stability and predictability. This is achieved by central bank intervention in the foreign exchange market, buying or selling domestic currency as needed to maintain the exchange rate within the target band.

When the Exchange Rate Fluctuates Around a Fixed Central Target,allowing