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Given below are two statements, one is labelled as Assertion (A) and the other as Reason (R).
Assertion (A) : The value of national currency determined by demand and supply of foreign currency is called flexible exchange rate.
Reason (R) : Demand and supply of the foreign currency is being determined by the Central Bank.
Select the correct answer from the codes given below :
Explanation
Assertion (A) is correct: A flexible exchange rate system (also known as a floating exchange rate) is one where the value of a national currency is determined by the market forces of demand and supply in the foreign exchange market.
Reason (R) is incorrect: In a flexible exchange rate system, demand and supply are determined by market participants such as importers, exporters, investors, and speculators based on economic fundamentals, not by the Central Bank. If the Central Bank fixes or determines the rate, it is called a fixed exchange rate system. While Central Banks may intervene to reduce volatility (managed float), they do not "determine" the market demand and supply itself.
SIMILAR QUESTIONS
Given below are two statements one is labelled as Assertion (A) and other as Reason (R) :
Assertion (A) : The government faces a tough time tackling the bottleneck inflation.
Reason (R) : The situation is due to deficiencies existing in the economy such as supply bottleneck and inefficient distribution.
Select the correct answer from the codes given below.
Codes :
Given below are two statements one is labelled as Assertion (A) and other as Reason (R) :
Assertion (A) : The President of India determines the qualifications of the Chairman and Members of the Finance Commission.
Reason (R) : Chairman and members are appointed by the President of India.
Select the correct answer using the codes given below.
Codes :
Given below are two statements, one is labelled as Assertion (A) and the other as Reason (R).
Assertion (A) : Investment in human capital yields returns in the future.
Reason (R) : Education and health make people more productive.
Select the correct answer from the code given below :
Given below are two statements one is labelled as Assertion (A) and the other as Reason (R).
Assertion (A) : Phytoplankton grow in abundance in the limnetic zone.
Reason (R) : Limnetic zone is open water zone.
Select the correct answer from the code given below :
Code :