When a country operates with a currency board, the central bank's sole objective is to:

Question

Quizplus · Accepted Answer

When a country operates with a currency board, the central bank's main responsibility is to maintain a fixed exchange rate between the local currency and the currency to which it is pegged. This means that it must hold reserves of the foreign currency equivalent to the amount of local currency in circulation, and be ready to buy or sell its own currency to maintain the exchange rate within a narrow band. Therefore, the correct answer is C - maintain the exchange rate.

When a Country Operates with a Currency Board, the Central