The value of a country's fixed exchange rate is determined by
A) the country's currency board.
B) the country's government or central bank.
C) the central bank of the country to which its currency is pegged.
D) supply of and demand for the country's currency.

Question

Quizplus · Accepted Answer

The value of a country's fixed exchange rate is determined by its government or central bank, as they decide the level at which they will peg their currency to another currency or a basket of currencies. The government or central bank may adjust the exchange rate as needed to maintain the fixed value of the currency. Currency boards and the central bank of the country to which its currency is pegged play a role in supporting the fixed exchange rate but do not determine the value of the currency. Supply of and demand for the country's currency may affect the exchange rate in the short-term but are not the primary determinants of a fixed exchange rate.

The Value of a Country's Fixed Exchange Rate Is Determined