The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4

-What is a currency board?
A)A fixed exchange rate that, by law, exchanges domestic currency for a specified foreign currency at a fixed exchange rate.
B)A floating exchange rate.
C)A managed floating exchange-rate policy that the government adjusts periodically according to some economic indicator.
D)A laissez-faire exchange-rate policy.
E)An interventionist exchange-rate policy.

Question

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4
 
-What is a currency board?
A)A fixed exchange rate that, by law, exchanges domestic currency for a specified foreign currency at a fixed exchange rate. 
B)A floating exchange rate. 
C)A managed floating exchange-rate policy that the government adjusts periodically according to some economic indicator. 
D)A laissez-faire exchange-rate policy. 
E)An interventionist exchange-rate policy.

Quizplus · Accepted Answer

A currency board is a type of fixed exchange rate system where the government or central bank issues domestic currency that is fully backed by a foreign reserve currency. The domestic currency can be exchanged at a fixed exchange rate with the reserve currency, which provides a high level of stability for the domestic currency. This is in contrast to a floating exchange rate system, where the value of a currency is determined by supply and demand in the foreign exchange market. A managed floating exchange-rate policy, laissez-faire exchange-rate policy or interventionist exchange-rate policy are not currency boards.

The Figure Below Shows the Demand (D) and Supply (S)