International businesses with markets and production facilities in other countries, or that use materials from different countries need to understand the ways and rates at which currency is converted. Countries may operate using different exchange rate regimes, all of which have different advantages and disadvantages.

Governments around the world pursue a number of different exchange rate policies. No one exchange rate system is universal, and the international monetary system is continually emerging. One key factor an international business must consider when looking at foreign markets is how the currency will be converted into the home-country currency. Because the foreign exchange market is so volatile, the firm needs to understand the advantages and disadvantages of each regime.

Match each description to the correct currency arrangments.

Currencies:

a. Floating exchange rate
b. Fixed exchange rate
c. Managed-float
d. Pegged exchange rate
e. Target Zone

Descriptions:

1.Reduces uncertainty
2. Uncertainty
3. Fluctuation with limits
4. Limited options
5. Difficult
6. No uncertainty
7. Unknown elements
8. Government adjusts
9. Market-based
10. Continual government
11. Intervention