Answer (B) is correct. Exchange rates “float” when they are set by supply and demand, not by agreement among countries. In a managed float, central banks buy and sell currencies at their discretion to avoid erratic fluctuations in the foreign currency market. The objective of such transactions is to “manage” the level at which a particular currency sells in the open market. For instance, if there is an oversupply of a country’s currency on the foreign currency market, the central bank will purchase that currency to support the market.