Under which system, government through their central banks buy or sell their currencies in the foreign exchange market whenever exchange rates deviate from their stated par values?

Question

Quizplus · Accepted Answer

The fixed-rate system is the one where the government through their central banks buy or sell their currencies in the foreign exchange market whenever exchange rates deviate from their stated par values. In this system, the exchange rates are fixed, and the government intervenes to maintain them. The float system, on the other hand, is where the exchange rates are determined by the market forces of supply and demand, and the government does not intervene. Appreciation refers to the increase in value of a currency in comparison to other currencies. Therefore, the correct option is A.

Under Which System, Government Through Their Central Banks Buy or Sell