Under which of the following circumstances does an exchange-rate policy accept the foreign exchange market's effect on currency value?
A) if the exchange rate is greater than the maximum rate limit
B) if the exchange rate is within the agreed range of fluctuation
C) if the exchange rate fluctuation is lesser than a minimum rate
D) if the exchange rate fluctuation remains unpredictable

Question

Quizplus · Accepted Answer

An exchange-rate policy that accepts the foreign exchange market's effect on currency value is typically one that allows for fluctuations within an agreed range. This means that the exchange rate can move up or down within a certain limit or range of fluctuation. If the exchange rate goes beyond this range, then the policy may need to intervene to stabilize the currency. However, as long as the exchange rate remains within the agreed range, the policy accepts the foreign exchange market's effect on currency value.

Under Which of the Following Circumstances Does an Exchange-Rate Policy