The exchange rate system and the difference between fixed exchange rate and managed float exchange rate.
Explanation of Solution
Exchange rate system:
An exchange rate system explains an agreement between countries on how to determine the exchange rate.
Difference between fixed exchange rate and managed floating exchange rate:
Under fixed exchange rate system, countries agree to keep the exchange rate fixed among their currencies for a long time. Under managed floating exchange rate, the demand and supply of currencies determine the equilibrium value of the currencies, with occasional government intervention.
Concept introduction:
Exchange rate system: An exchange rate system explains an agreement between countries on how to determine the exchange rate.
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Macroeconomics, Student Value Edition (6th Edition)
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