When exchange rates are not determined in the market but are instead set by a country's central bank, we say that the country's exchange rate is
A)flexible.
B)fixed.
C)a nominal exchange rate.
D)a real exchange rate.
E)non-convertible.

Question

Quizplus · Accepted Answer

When a country's central bank sets the exchange rate, it is considered a fixed exchange rate. In contrast, a flexible exchange rate is determined by market forces of supply and demand. A nominal exchange rate is the rate at which one currency can be exchanged for another, without accounting for differences in purchasing power between the two currencies. A real exchange rate takes into account the relative prices of goods and services between two countries. Non-convertible refers to a situation where a currency cannot be exchanged for another currency due to government restrictions or lack of market demand.

When Exchange Rates Are Not Determined in the Market but Are