Suppose that a country follows a managed-float policy but that its exchange rate is currently floating freely.

Explanation
Under a floating policy, as there is no requirement to buy or sell the currency to change the exchange rate, the official reserves would not change.

In order to reduce the deficit in the current account, a country has to make its currency less expensive in the market. Consequently, it has to depreciate its currency in relation to other currencies in the international market. In order to achieve this, the country has to increase its supply of domestic currency. It does this by selling its own currency for foreign currency, so that supply for domestic currency increases in the market relative to foreign currency. This will also lead to the accumulation of more foreign reserves.

Verified Answer
The official reserve will remain the same under the floating exchanged rate regime.

It will sell its domestic currency in order to decrease the size of the current account deficit. This will lead to an increase in foreign reserves through depreciation.