QUESTION 40 A floating exchange rate system means a central bank can ____. only

Question

QUESTION 40

A floating exchange rate system means a central bank can ____.

only print money that is backed by gold

can only print money to match a competitor country's printing

can create as much money as needed to help advance economic and political agendas

will not do much to help an economy

only print money that is backed by gold

can only print money to match a competitor country's printing

can create as much money as needed to help advance economic and political agendas

will not do much to help an economy

Explanation / Answer

Answer is D

Under fixed exchange rate system central bank sets the exchange rate and makes efforts to keep it stable.

Under floating exchange rate system, central bank does not define the exchange rate. Market forces such as demand and supply set the exchange rate. Bank only intervene when there is large fluctuation in that rate.

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