Fixed exchange rates are often maintained by using all of the following except:
A)open speculation by individual traders in foreign currency markets.
B)international monetary reserves held by central banks.
C)controls on imports and exports such as tariffs and quotas.
D)domestic macroeconomic adjustments using monetary and fiscal policies.

Question

Quizplus · Accepted Answer

Open speculation by individual traders in foreign currency markets can actually destabilize fixed exchange rates by increasing volatility and putting upward or downward pressure on a currency's value. Therefore, fixed exchange rates are not maintained using open speculation. The other answer choices are all methods that can be used to maintain fixed exchange rates. B) International monetary reserves held by central banks can be used to buy or sell currencies to maintain a fixed exchange rate. C) Controls on imports and exports such as tariffs and quotas can help to regulate the inflow and outflow of currency, which can help to maintain a fixed exchange rate. D) Domestic macroeconomic adjustments using monetary and fiscal policies can help to keep inflation and other factors in check, which can help to maintain a stable exchange rate.

Fixed Exchange Rates Are Often Maintained by Using All of the Following