Compare and contrast the fixed, freely floating, and managed float exchange rate systems.

Under a $-$Select$-$fixedfreely floatingmanaged floatItem $1$ exchange rate system, government intervention would be nonexistent.

Under a $-$Select$-$fixedfreely floatingmanaged floatItem $2$ exchange rate system, governments will allow exchange rates move according to market forces; however, they will intervene when they believe it is necessary.

Under a $-$Select$-$fixedfreely floatingmanaged floatItem $3$ exchange rate system, the governments attempted to maintain exchange rates within $1\%$ of the initially set value $($slightly widening the bands in $1971).$

What are some advantages and disadvantages of a freely floating exchange rate system versus a fixed exchange rate system?

A $-$Select$-$fixedfreely floatingItem $4$ exchange rate system may help correct balance$-$of$-$trade deficits since the currency will adjust according to market forces. Countries are more insulated from problems of foreign countries under a $-$Select$-$fixedfreely floatingItem $5$ exchange rate system.

A disadvantage of $-$Select$-$fixedfreely floatingItem $6$ exchange rates is that firms have to manage their exposure to exchange rate risk. $-$Select$-$FixedFreely floatingItem $7$ rates can often have a significant adverse impact on a country's unemployment or inflation.