Question 2 : There are currently four different exchange rate systems heing used hy governments around the world. These systems are classified according to the degree of government control. Central banks have sought to influence exchange rates of their domestic currencies for various reasons from time to time.

Required:

(a) Identify and discuss the FOUR (4) exchange rate systems used by governments around the world.

(b) Examine the THREE (3) reasons for central banks to intervene in the movement of exchange rates. Explain how a central bank may use direct intervention to change the value of its domestic currency.