Introductory Macroeconomics

Book: Introductory Macroeconomics

Chapter: 6. Open Economy Macroeconomics

Subject: Social Science - Class 12th

Q. No. 19 of Exercises

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Discuss some of the exchange rate arrangements that countries have entered into to bring about stability in their external accounts.

The exchange rate arrangements that the countries have entered into to bring stability in their external accounts are –

a) Wider bands: This system allows adjustment in fixed exchange rate. Under this system only 10% variation between the currencies of any two countries is allowed.

b) Crawling peg: The system of crawling peg allows continuous and regular adjustment in the exchange rate but it is limited up to 1% variation at one point of time.

c) Float management: Under this scheme the government can intervene to vary the exchange rates. It is done as per the demand of situation and has no limit as above two.


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