Which of the following is true?
A)If an exchange rate is allowed to vary across a fixed basket of currencies, it is called a hard peg.
B)If an exchange rate is not allowed to vary against the target currency, it is called a soft peg.
C)If an exchange is only allowed to fluctuate within a set band, it is considered to be a flexible exchange rate system.
D)A soft peg is when a currency's exchange rate is only allowed to fluctuate within a set band.

Question

Quizplus · Accepted Answer

A soft peg, also known as a fixed float, allows a currency's exchange rate to fluctuate within a set band. This contrasts with a hard peg, where the rate is fixed to another currency or basket of currencies, and a fully flexible exchange rate, which can fluctuate freely according to market forces.

Which of the Following Is True