Question

A country has adopted a dirty-float system over a clean-float system. In doing so the country has agreed to?.

Answer 1

A country has adopted a dirty-float system over a clean-float system. In doing so the country allow its currency to be fixed to U.S Dollar.

A clean float, also known as a pure exchange rate, happens when a currency's value or exchange rate is solely determined by market supply and demand. A dirty float, which happens when governmental regulations or laws have an impact on currency pricing, is the opposite of a clean float.

Since there are no restrictions on capital flow, markets are able to allocate resources (including financial capital) effectively. Additionally, changes in the nominal exchange rate account for the majority of adjustments to both domestic and foreign shocks.

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