Which exchange rate mechanism is intended to insulate the balance of payments from short-term capital movements while providing exchange rate stability for commercial transactions?
A) dual exchange rates
B) managed floating exchange rates
C) adjustable pegged exchange rates
D) crawling pegged exchange rates

Question

Quizplus · Accepted Answer

Dual exchange rates are designed to protect the balance of payments from short-term capital flows by maintaining one exchange rate for commercial transactions (trade in goods and services) and another for financial transactions, thereby providing stability for commercial activities while allowing flexibility for financial movements.

Which Exchange Rate Mechanism Is Intended to Insulate the Balance