To maintain a fixed exchange rate,a central bank
A) must buy up any excess supply of its currency at that rate
B) must buy up any excess demand for its currency at that rate
C) must maintain a fixed money supply
D) must also maintain a fixed interest rate target
E) should "buy low and sell high"

Question

Quizplus · Accepted Answer

To maintain a fixed exchange rate, a central bank must buy up any excess supply of its currency at the fixed rate to prevent the currency from depreciating. This involves using its foreign exchange reserves to purchase its own currency.

To Maintain a Fixed Exchange Rate,a Central Bank