differentiate between a fixed, floating and managed exchange rate.
A fixed exchange rate is a system in which the value of a country's currency is set and maintained at a fixed level in relation to another currency, a basket of currencies, or a commodity such as gold. The central bank or government intervenes in the foreign exchange market to keep the exchange rate stable.
A floating exchange rate, also known as a flexible exchange rate, is a system in which the value of a country's currency is determined by the foreign exchange market based on supply and demand. The exchange rate fluctuates freely and is not pegged to any specific currency or commodity. In this system, the government or central bank does not intervene to influence the value of the currency.
A managed exchange rate is a system that falls between a fixed and floating exchange rate. In this system, the government or central bank intervenes in the foreign exchange market to stabilize the currency at a specific level while still allowing some degree of flexibility. The government may set a target range for the exchange rate or actively buy or sell its currency to influence its value. This system gives the government some control over the currency's value while still allowing market forces to play a role.