The most extreme form of an exchange rate peg is a
A) currency board
B) flexible rate
C) floating rate
D) adjustable rate

Question

Quizplus · Accepted Answer

A currency board is the most extreme form of exchange rate peg where a country's central bank fully commits to exchange domestic currency for a specified foreign currency at a fixed exchange rate, and holds reserves of the foreign currency equal to the amount of domestic currency in circulation. This essentially ties the domestic monetary base to the exchange rate and lessens the ability of the central bank to conduct monetary policy.

The Most Extreme Form of an Exchange Rate Peg Is