Question : Another name of flexible exchange rate system is:
Option 1: Adjustable peg system
Option 2: Dirty floating system
Option 3: Floating exchange system
Option 4: Both (a) and (b)
Correct Answer: Floating exchange system
Solution : The correct answer is (c) Floating exchange system.
Another name for the flexible exchange rate system is the floating exchange rate system. In a floating exchange rate system, the exchange rate between two currencies is determined by market forces of supply and demand without any government intervention or fixed peg to another currency. The exchange rate fluctuates freely based on various economic factors such as interest rates, inflation, trade balances, and capital flows. The term "floating" reflects the flexibility and variability of the exchange rate under this system.
