The exchange rate system in which government fixes the exchange rate at a particular level is known as:

Fixed Exchange Rate System

The correct answer is option (1) : Fixed Exchange Rate System

(1) Fixed Exchange Rate System: In a fixed exchange rate system, the government or the central bank of a country sets and maintains a specific exchange rate for its currency in relation to another currency or a basket of currencies. This rate is typically kept stable and is not allowed to fluctuate freely in response to market forces. Central banks often intervene in the foreign exchange market to buy or sell their currency to maintain the fixed exchange rate.

(2) Floating Exchange Rate System: - In a floating exchange rate system, the value of a currency is determined by market forces of supply and demand in the foreign exchange market. The exchange rate is allowed to fluctuate freely based on various economic factors such as inflation. interest rates, trade balances, and market speculation. Government and central banks do not actively intervene to maintain a specific exchange rate, and the value of the currency is determined by market participants.

(3) Flexible Exchange Rate System: - The term "flexible exchange rate system" is often used interchangeably with the "floating exchange rate system." 

(4) Managed Floating Exchange Rate System: - The managed floating exchange rate system is a hybrid approach that combines elements of both fixed and floating exchange rate systems. In this system, the exchange rate is allowed to fluctuate based on market forces, but central banks or governments may intervene occasionally to stabilize or guide the currency value. While the currency is not pegged to a fixed rate, authorities may engage in interventions to prevent excessive volatility or achieve specific economic objectives.