| Assertion [A] Fixed exchange rate system is more stable as compared to floating exchange rate. |
| Reason [R] Free play of demand and supply of foreign exchange brings ambiguity in the system. |
A) Assertion [A] is true and Reason [R] is a correct reason of Assertion [A].
B) Assertion [A] is true and Reason [R] is not a correct reason of Assertion [A].
C) Assertion [A] is false, but Reason [R] is true
D) Both are false
Correct Answer: A
Solution :
Under fixed exchange rate, determination and changes are done by government or central bank while under flexible exchange rate, free play of market forces makes the floating at all times.
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