Under a fixed exchange rate regime, the government of the country is officially responsible for:
A) Intervention in the foreign exchange markets using reserves and gold.
B) Setting the fixed/parity exchange rate.
C) Maintaining the fixed/parity exchange rate.
D) All of the above.

Question

Quizplus · Accepted Answer

Under a fixed exchange rate regime, the government of the country is responsible for all three options mentioned in the choices. They intervene in the foreign exchange markets to maintain the fixed exchange rate by using their reserves and gold. They also set the fixed exchange rate initially, and then maintain it by buying or selling currencies in the foreign exchange market.

Under a Fixed Exchange Rate Regime, the Government of the Country