An exchange-rate system in which the nominal exchange rate is set by the government is known as
A)a flexible exchange-rate system.
B)a floating exchange-rate system.
C)a fixed exchange-rate system.
D)an exchange-rate union.

Question

Quizplus · Accepted Answer

A fixed exchange-rate system is one in which the government sets the nominal exchange rate. Under this system, the exchange rate is usually pegged to another currency or a basket of currencies. The central bank intervenes in the foreign exchange market to maintain the exchange rate at the fixed level.

An Exchange-Rate System in Which the Nominal Exchange Rate Is