A 'fixed exchange rate system' is one in which:
A)the currency is backed by a fixed amount of gold.
B)the government defines its currency to be worth a certain amount in terms of another currency and ensures that the rate remains at that level.
C)foreign exchange traders accept only a fixed price for their goods, regardless of the demand and supply for the currency.
D)demand and supply adjust so that there are no shortages or surpluses of currency in the market.

Question

Quizplus · Accepted Answer

In a fixed exchange rate system, the government defines the value of its currency in terms of another currency (usually the US dollar) and takes measures to ensure that the exchange rate remains stable at that level. This can involve buying and selling its own currency in foreign exchange markets and adjusting interest rates. It does not involve backing the currency with gold (as in the gold standard) or fixing the price of goods sold in foreign markets. Demand and supply may still have an influence on the exchange rate, but the government seeks to stabilize it by intervening in the market.

A 'Fixed Exchange Rate System' Is One in Which