Currency

Question 1

Managed floating

Answer 1

When the central bank may choose to intervene in the foreign exchange markets to affect the value of a currency to meet specific macroeconomic objectives

Question 2

Advantages of managed floating

Answer 2

Improve balance of trade
Reduced risk of deflationary recession
Rebalance the economy
Can sell foreign currency to overseas investors to reduce debt

Question 3

Disadvantages of managed floating

Answer 3

Requires large scare foreign exchange reserves
Difficult to be accurate
Conflict of interest rates being affected
Central bank loses power