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.

Question

Quizplus · Accepted Answer

When exchange rates are set by a country's central bank, it is known as a fixed exchange rate regime, where the central bank determines the value of the currency relative to other foreign currencies. Flexible exchange rates, on the other hand, are determined by the market forces of supply and demand. Nominal exchange rate refers to the rate at which one currency can be exchanged for another, while the real exchange rate takes into account inflation and other factors that affect the purchasing power of a currency.

When Exchange Rates Are Not Determined in the Market but Are