Under a hard peg,a country

Question

Quizplus · Accepted Answer

Under a hard peg, a country commits to fixing the nominal exchange rate to the currency of another country or to a basket of currencies, and this commitment is expected to be sustained over an indefinite period of time with minimal deviation. The country's monetary authority, typically the central bank, intervenes in the foreign exchange market as necessary to maintain the pegged rate, which can require significant reserves of foreign currency. Government intervention in the foreign exchange market is limited, if not entirely eliminated, under a hard peg. Therefore, options A, B, and E are incorrect, and option D is not an accurate statement.

Under a Hard Peg,a Country