Which of the following types of exchange rate policies is apt for a pure free market economy?
A) Dirty float
B) Flexible float
C) Clean float
D) Target exchange rate

Question

Which of the following types of exchange rate policies is apt for a pure free market economy? 
A) Dirty float 
B) Flexible float 
C) Clean float 
D) Target exchange rate

Quizplus · Accepted Answer

A pure free market economy is characterized by minimal government intervention, where prices and exchange rates are determined by the forces of supply and demand in the market. In such an economy, the most appropriate exchange rate policy would be a clean float. A clean float is a system where the exchange rate is determined purely by market forces without any government intervention or manipulation. It allows market participants to freely buy and sell currencies, which helps to maintain equilibrium in the foreign exchange market. Therefore, clean float is the most apt exchange rate policy for a pure free market economy.

Which of the Following Types of Exchange Rate Policies Is