Identify the exchange rate system under which 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.

Dirty Floating

The correct answer is Option (4) → Dirty Floating

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.