Multiple Choice QuestionSince 1971, most countries have used which type of exchange-rate system?Multiple choice question.A fixed exchange-rate system under full government controlA fixed exchange-rate system with limited government interventionA flexible exchange-rate system with occasional government interventionA floating exchange-rate system without government intervention
Question
Multiple Choice QuestionSince 1971, most countries have used which type of exchange-rate system?Multiple choice question.A fixed exchange-rate system under full government controlA fixed exchange-rate system with limited government interventionA flexible exchange-rate system with occasional government interventionA floating exchange-rate system without government intervention
Solution
The correct answer is C. A flexible exchange-rate system with occasional government intervention.
Here's why:
Since 1971, most countries have moved away from a fixed exchange-rate system under full government control. This system was prevalent under the Bretton Woods system, which collapsed in 1971.
Option B, a fixed exchange-rate system with limited government intervention, is also not the most common system. While some countries do maintain a fixed or pegged exchange rate, it is not the majority.
Option D, a floating exchange-rate system without government intervention, is not entirely accurate. While many countries do use a floating exchange rate, the government often intervenes to stabilize the currency market and prevent excessive volatility.
Therefore, the most accurate answer is option C, a flexible exchange-rate system with occasional government intervention. This system allows the exchange rate to be determined by market forces, but with the government stepping in when necessary to maintain economic stability.
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