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9708 · 11.2

Exchange rates

**Exchange rates** (11.2) at **A Level** builds on **AS 6.4**. Focus on **systems** and **policy constraints** — especially the impossible trinity in evaluation.

Need to know

What you need to know

  • A managed float combines features of both fixed and floating systems.
  • Central banks intervene by buying or selling currency reserves to influence the rate.
  • Key objectives include reducing volatility, managing inflation, and influencing the current account.
  • 'Dirty float' is a term implying heavy and often non-transparent intervention by a central bank.

Explanation

Exchange rates

  1. A managed float combines features of both fixed and floating systems.
  2. Central banks intervene by buying or selling currency reserves to influence the rate.
  3. Key objectives include reducing volatility, managing inflation, and influencing the current account.
  4. 'Dirty float' is a term implying heavy and often non-transparent intervention by a central bank.
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