Under this system, official reserve transactions are not equal to zero.

Managed Floating Exchange Rate.

The correct answer is Option (3) → Managed Floating Exchange Rate.

In a managed floating exchange rate system, the central bank sometimes intervenes in the foreign exchange market to control excessive fluctuations in the currency. Because of this intervention, the central bank buys or sells foreign currency, which leads to official reserve transactions not being zero.

• In a fixed exchange rate, intervention is regular and large. In a Fixed Exchange Rate, the central bank must intervene continuously to keep the currency at a fixed value. Official reserves are always in heavy use.

• In a flexible exchange rate, there is no intervention, so official reserves are zero.

• Managed floating lies in between — intervention happens occasionally, so official reserve transactions are not zero.

"NCERT: Managed Floating:  Without any formal international agreement, the world has moved on to what can be best described as a managed floating exchange rate system. It is a mixture of a flexible exchange rate system (the float part) and a fixed rate system (the managed part). Under this system, also called dirty floating, central banks intervene to buy and sell foreign currencies in an attempt to moderate exchange rate movements whenever they feel that such actions are appropriate. Official reserve transactions are, therefore, not equal to zero."

Note: Although official reserve transactions are non-zero in both systems, the nature of intervention is different. In a fixed exchange rate, the central bank intervenes continuously and compulsorily to maintain a predetermined value of the currency, so reserves are always and heavily used. The phrase “not equal to zero” in the question implies occasional or limited intervention, not constant intervention. This situation matches a managed floating exchange rate, where the central bank steps in only when fluctuations are excessive, making official reserve transactions non-zero but not regular.