Under a managed floating exchange rate regime, central bank intervention is most effective when it primarily influences:

CA Foundation · Business Economics · RTP · May 2026
Under a managed floating exchange rate regime, central bank intervention is most effective when it primarily influences:
(A) A. Trade volumes directly
(B) B. Inflation expectations alone
(C) C. Market expectations about future exchange rate movements
(D) D. Long-term capital formation

Suggested Answer and Working Notes:

Correct Answer: Option (C)

C. Market expectations about future exchange rate movements

Topics: International Trade

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