Which exchange rate policy aims to shield the balance of payments from short-term capital flows while maintaining stability for commercial trade ?
Show answer Hide answer
Answer: A. dual exchange rates
Explanation
A dual exchange rate system applies distinct rates for commercial trade versus financial capital transactions. This separation helps shield the balance of payments from volatile short term capital movements effectively. Commercial transactions receive a stable rate to protect exporters and importers from sudden financial shocks. Governments implement dual exchange rates to manage balance of payments imbalances during economic instability. Financial capital flows often move rapidly creating speculative pressures that threaten domestic currency stability. Trade transactions require predictable currency values to maintain steady commercial contracts between international partners.
Developing economies frequently utilize currency controls to protect their foreign exchange reserves from speculative runs. International trade agreements often discourage complex exchange rate manipulations that distort fair market competition. Central banks monitor exchange rate policies closely to prevent balance of payments crises from destabilizing economies. Managed floating allows central banks to intervene in foreign exchange markets without setting distinct commercial rates. Adjustable pegged rates involve fixed parities that can be altered periodically rather than split dual tracks. Crawling pegged systems adjust exchange rates gradually according to specific economic indicators rather than dividing transactions.
Related questions
Q1. Which continent has the largest population in the world ?
Show answer Hide answer
Answer: B. Asia
Asia contains densely populated countries like China and India which drive its massive total population. The continent accounts for over half of the entire human population living across the globe. Vast geographic expans...
Q2. Which nation leads global cotton production ?
Show answer Hide answer
Answer: C. China
China possesses vast agricultural regions dedicated to intensive cotton cultivation and harvesting operations. Massive domestic textile manufacturing sectors drive China to produce enormous quantities of raw cotton annua...
Q3. Which business structure lies between a standard corporation and a partnership ?
Show answer Hide answer
Answer: B. Joint stock company
A joint stock company allows ownership shares to be bought and sold freely among multiple shareholders. It merges the limited liability feature of corporations with the collective investment nature of partnerships. Inves...
Q4. What measure is most likely to result in a more equitable distribution of income ?
Show answer Hide answer
Answer: C. An increase in progressive taxation
Progressive taxation levies higher percentage rates on individuals with higher levels of taxable income. Collected tax revenues fund social welfare programs that benefit low income households and reduce inequality. This...
Q5. Which metal is found in the highest abundance on Earth's crust ?
Show answer Hide answer
Answer: D. Silicon
Silicon constitutes approximately twenty-seven percent of the Earth crust by elemental mass. Oxygen is the single most abundant element, but silicon holds the top ranking among solid metals and metalloids. Geological sur...
Q6. What is the oldest hydroelectric power initiative in Pakistan ?
Show answer Hide answer
Answer: D. Malakand Dargai
Malakand Dargai holds the historical distinction of being an early hydroelectric power generation initiative in Pakistan. The project harnessed fast flowing river waters in the northern region to generate electricity loc...