_____ attempts to establish a fixed exchange-rate that is long-lived by focusing on maintaining the fixed exchange-rate and holds only foreign-currency assets.
A)A central bank
B)A monetary union
C)The IMF
D)A currency board

Question

Quizplus · Accepted Answer

A currency board is a monetary authority that aims to maintain a fixed exchange rate by holding foreign currency reserves equal to the amount of domestic currency in circulation. The currency board is legally obligated to exchange domestic currency for foreign currency at the fixed exchange rate, which helps to anchor the value of the domestic currency. The focus on holding only foreign-currency assets makes it more likely that the fixed exchange-rate will be maintained over the long-term compared to other options.

_____ Attempts to Establish a Fixed Exchange-Rate That Is Long-Lived