How does a country maintain a fixed exchange rate?
A) By intervening in the foreign exchange markets and buying or selling currency as needed to achieve the desired exchange rate.
B) By forbidding foreign exchange markets to trade currency at anything other than the official exchange rate.
C) By setting domestic interest rates to achieve purchasing power parity as the desired exchange rate.
D) By intervening in import and export markets to achieve the desired current account and exchange rate.

Question

Quizplus · Accepted Answer

A country maintains a fixed exchange rate by intervening in the foreign exchange markets, buying or selling its own currency to keep the exchange rate at its desired level.

How Does a Country Maintain a Fixed Exchange Rate