A government using a currency board backs its own currency with a foreign currency.

Question

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A currency board is a monetary authority that makes decisions about the valuation of a nation's currency, typically tying it to a foreign currency or basket of currencies. By doing so, the board commits to exchanging the domestic currency on demand at a fixed exchange rate with the foreign currency, thereby backing its own currency with the foreign reserves of the foreign currency. This system is used to ensure stability and confidence in the domestic currency.

A Government Using a Currency Board Backs Its Own Currency