The central bank of Country X buys and sells its own currency to ensure that the currency is always exchanged in a ratio of 2:1 with the currency of Country Y. What can we conclude about these two currencies?
A) Country X is using the Euro.
B) Country X has pegged its currency to the currency of Country Y.
C) Country X has an undesirable currency.
D) Country X allows its currency to float relative to the currency of Country Y.

Question

Quizplus · Accepted Answer

The central bank of Country X is pegging its currency to ensure a fixed exchange rate with the currency of Country Y. This means that the exchange rate is unlikely to fluctuate based on market forces and is being actively managed by the central bank.

The Central Bank of Country X Buys and Sells Its