One of the following statement is incorrect with respect to Foreign Exchange Rate. Choose the incorrect option :

Fixed Exchange rate system is also known as Floating Exchange rate system

The correct answer is option (3) : Fixed Exchange rate system is also known as Floating Exchange rate system

Fixed Exchange rate system: In this system, the exchange rate is set and maintained by the government or the central bank. It does not fluctuate based on market forces.

Floating Exchange rate system: In this system, the exchange rate is determined by market forces (supply and demand) without government intervention.

1.Fixed Exchange Rate System: In a fixed exchange rate system the value of a currency is set or "fixed" in relation to another currency or a basket of currencies. The central bank or government actively intervenes in the foreign exchange market to maintain this fixed rate. This system provides stability but requires continuous central bank intervention to defend the fixed rate.

2. Floating Exchange Rate System: In a floating exchange rate system, exchange rates are determined by market forces of supply and demand. Governments and central banks do not actively intervene to maintain a specific exchange rate. Exchange rates can fluctuate freely  based on economic conditions, trade balances, and other factors. This system allows for flexibility but can lead to exchange rate  volatility.

3. Managed Floating Exchange Rate System: In a managed floating system, exchange rate are allowed to float, but central banks or government occasionally intervene to influence or stabilize exchange rates. This intervention can include buying or selling currency in the foreign exchange market to manage the currency's value. Managed floating combines elements of both fixed and floating exchange rate system. This system is also called dirty floating.