A country that introduces a currency board commits itself to converting its domestic currency on demand into
A) another currency at a fixed exchange rate.
B) gold or silver at a fixed exchange rate.
C) gold or silver at a floating exchange rate.
D) another currency at a floating exchange rate.

Question

Quizplus · Accepted Answer

A country that introduces a currency board commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate. To make this commitment credible, the currency board holds reserves of foreign currency equal at the fixed exchange rate to at least 100 percent of the domestic currency issued.

A Country That Introduces a Currency Board Commits Itself to Converting