A currency board refers to the case where:
A)the central bank sterilizes changes in the money supply resulting from balance of payments disequilibria
B)the money supply of the nation is backed by 100 percent international reserves
C)the nation operates under flexible exchange rates
D)the nation retains firm control over its money supply

Question

Quizplus · Accepted Answer

In a currency board, the country's currency is backed by 100 percent international reserves, typically in the form of a specific foreign currency such as the US dollar. This means that the central bank cannot print money beyond the amount of reserves it holds, and therefore has limited control over the money supply. The goal of a currency board is to maintain a fixed exchange rate with the backing currency, which requires strict adherence to the reserve requirement.

A Currency Board Refers to the Case Where