Question4 An exchange rate regime where the domestic currency relative to a foreign currency is held within a defined band is termed as ______________. a free float a managed float a fixed exchange rate a brokered exchange rate a pegged exchange rate ResetMaximum marks: 1 Flag question undefinedSingle choice
A
a free float
B
a managed float
C
a fixed exchange rate
D
a brokered exchange rate
E
a pegged exchange rate

Question

Question4 An exchange rate regime where the domestic currency relative to a foreign currency is held within a defined band is termed as ______________. a free float a managed float a fixed exchange rate a brokered exchange rate a pegged exchange rate ResetMaximum marks: 1 Flag question undefinedSingle choice

A

a free float

B

a managed float

C

a fixed exchange rate

D

a brokered exchange rate

E

a pegged exchange rate

BlackTom AI · Accepted Answer

First, let's restate the question: it asks which exchange rate regime keeps the domestic currency within a defined band relative to a foreign currency.
Option A: 'a free float' implies no formal band; the exchange rate is determined by market forces with virtually no intervention, so this is not correct for a defined band.
Option B: 'a managed float' refers to a regime where the currency mostly floats but the authorities intervene periodically to keep movements within limits or bands, which matches the idea of a defined range or band.
Option C: 'a fixed exchange rate' means the currency is pegged to another currency or basket with little to no variation, requiring a constant official commitment to maintain the level, which is stricter than a band and not exactly the described band regime.
Option D: 'a brokered exchange rate' is not a standard term describing a regime with bands; it usually refers to a market where a broker matches buyers and sellers rather than a formal policy framework.
Option E: 'a pegged exchange rate' typically denotes a fixed parity with a currency anchor, again implying a fixed level rather than a fluctuating band unless it’s a very narrow peg, but the classic description of a banded system aligns more with managed float.
Thus, among the choices, the description that best corresponds to holding the domestic currency within a defined band is the managed float regime, where authorities intervene to keep fluctuations within a target range rather than letting it float freely or fixing it rigidly.

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