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Sarkari MCQs Government Exam Question Bank
Question no. 24530

Which exchange rate system involves frequently adjusting the par value by minor increments to eliminate payments imbalances ?

Select your answer for: Which exchange rate system involves frequently adjusting the par value by minor increments to eliminate payments imbalances ?
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Answer: D. crawling pegged exchange rates

Explanation

Crawling pegs involve continuous minor adjustments to official exchange rate par values. Frequent small changes prevent sudden disruptive currency devaluations or revaluations. This system helps countries eliminate persistent balance of payments imbalances smoothly. Fixed exchange rate systems sometimes require adjustments to correct fundamental imbalances. Crawling pegs combine elements of fixed parities and flexible floating exchange rates. Central banks implement pre announced adjustment schedules or respond to market indicators.

Developing nations experiencing moderate inflation often adopt crawling peg regimes. International monetary stability is supported by predictable exchange rate adjustments. Speculative attacks are discouraged when par values adjust continuously in small steps. Dual exchange rates maintain two distinct official rates for different transaction types. Adjustable pegged systems involve infrequent large devaluations rather than minor steps. Managed floating allows market forces to determine rates with intermittent central bank intervention.

Subject
Economics
Category
Economics
Topic
—
Difficulty
medium

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