In a currency board arrangement:
A)the currency board can adjust either of the two currencies involved.
B)the currency board determines the exchange rate.
C)the two currencies involved float independently of each other.
D)the two currencies involved maintain a fixed exchange rate.

Question

Quizplus · Accepted Answer

In a currency board arrangement, the two currencies involved maintain a fixed exchange rate. The currency board is responsible for ensuring that the fixed exchange rate is maintained by adjusting the supply of domestic currency in response to changes in demand. The currency board does not determine the exchange rate, but rather it ensures that the exchange rate remains fixed.

In a Currency Board Arrangement