The following are features of flexible rate system select the correct option.

(A) Give more flexibility to government.

(B) Restricts countries in conducting monetary policies.

(C) Government intervenes to fill gaps in BOP.

(D) Automatically takes care of surplus and deficit in BOP.

(E) Speculator attack on currency.

Choose the correct answer from the options given below :

(A), (D) and (E) only

The correct answer is option (4) : (A), (D) and (E) only

(A) Give more flexibility to government: This statement is correct. In a flexible exchange rate system, governments have more flexibility to conduct monetary and fiscal policies independently of the exchange rate.

(B) Restricts countries in conducting monetary policies: This statement is incorrect. A flexible exchange rate system actually allows countries more freedom to conduct their monetary policies as they are not tied to maintaining a fixed exchange rate.

(C) Government intervenes to fill gaps in BOP: This statement is incorrect. In a flexible exchange rate system, governments typically do not intervene directly to correct gaps in the Balance of Payments (BOP); adjustments are made through market forces.

(D) Automatically takes care of surplus and deficit in BOP: This statement is correct. In a flexible exchange rate system, exchange rates adjust to automatically correct imbalances in the BOP over time. For instance, a trade deficit might cause the currency to depreciate, making exports cheaper and imports more expensive, which can help narrow the deficit. However, these adjustments may not be immediate or perfectly balanced.

(E) Speculator attack on currency: This statement is correct. In a flexible exchange rate system, Speculators might attempt to profit by betting on a currency's depreciation or appreciation, which can cause short-term volatility in the exchange rate.