Under a fixed exchange rate regime:
A) the central bank allows supply and demand in the foreign exchange market to determine the exchange rate.
B) central banks in other countries determine our exchange rate.
C) the central bank buys or sells any quantity of foreign exchange at the fixed exchange rate.
D) all of the above.

Question

Quizplus · Accepted Answer

Under a fixed exchange rate regime, the central bank commits to buying or selling any quantity of foreign exchange at the fixed exchange rate to maintain that rate, regardless of supply and demand in the market.

Under a Fixed Exchange Rate Regime