When the central banks of various countries intervene in the foreign exchange market to maintain an exchange rate,this type of exchange rate system is called a ________ exchange rate system.

Question

Quizplus · Accepted Answer

When central banks intervene in the foreign exchange market to maintain a certain exchange rate, it is known as a fixed exchange rate system. In this system, the central banks fix the exchange rate of their currency to another currency or a basket of currencies. This is in contrast to a flexible exchange rate system, where the exchange rate is determined by the market forces of supply and demand.

When the Central Banks of Various Countries Intervene in the Foreign