Policy makers can select from a number of different exchange rate regimes.One of those options is a "hard peg." Which of the following best represents a hard peg?
A)a revaluation
B)a currency board
C)a flexible exchange rate regime
D)the EMS
E) none of the above

Question

Quizplus · Accepted Answer

A hard peg is a fixed exchange rate regime where the value of a currency is fixed to another currency, such as the U.S. dollar or euro, or to a commodity like gold. A currency board is a specific form of hard peg where the central bank is prohibited from issuing new currency unless it is fully backed by foreign reserves. Revaluation is a change in the exchange rate that increases the value of a currency relative to another currency or a basket of currencies. A flexible exchange rate regime allows the exchange rate to be determined by market forces. The EMS (European Monetary System) was a fixed exchange rate system used in Europe prior to the adoption of the euro. Therefore, the best choice that represents a hard peg is B - a currency board.

Policy Makers Can Select from a Number of Different Exchange