Policy makers can select from a number of different exchange rate regimes. One of those options is a "hard peg". Which of the following best represents a hard peg?
A) A crawling peg.
B) A revaluation.
C) A currency board.
D) The EMS.
E) A flexible exchange rate regime.

Question

Quizplus · Accepted Answer

A hard peg refers to a fixed exchange rate regime where the central bank guarantees to exchange domestic currency for a foreign currency at a fixed exchange rate. A currency board is a specific example of a hard peg regime where the central bank holds foreign currency reserves equal to the domestic currency in circulation, ensuring a fixed exchange rate.

Policy Makers Can Select from a Number of Different Exchange