A fixed exchange rate means that supply and demand of the currency determine its exchange rate.

Question

Quizplus · Accepted Answer

A fixed exchange rate is a system in which the government or central bank of a country sets the exchange rate of its currency against another currency or a basket of currencies. This means that the supply and demand of the currency do not determine its exchange rate. Instead, the government or central bank intervenes in the foreign exchange market to maintain the fixed exchange rate.

A Fixed Exchange Rate Means That Supply and Demand of the Currency