A ______ is a type of a fixed exchange rate system in which the commitment to the fixed exchange rate is very firm
A) currency board
B) monetary policy board
C) fiscal policy board
D) customs board

Question

Quizplus · Accepted Answer

A currency board is a type of fixed exchange rate system in which a country's central bank has a legal obligation to maintain a fixed exchange rate with another currency, often the currency of a major trading partner or a widely-used international currency like the US dollar or the euro. Under a currency board system, the central bank must hold sufficient reserves of the foreign currency to allow for the conversion of the local currency at the fixed rate, and cannot create or issue new currency without first acquiring additional reserves of the foreign currency. This makes the commitment to the fixed exchange rate very firm, which helps to provide greater stability and predictability for trade and investment.

A ______ Is a Type of a Fixed Exchange Rate