Which of the following is a method to maintain a fixed exchange rate?
I. exchange market intervention
II. monetary policy
III. foreign exchange controls

Question

Quizplus · Accepted Answer

All three methods - exchange market intervention, monetary policy, and foreign exchange controls - can be used to maintain a fixed exchange rate.

- Exchange market intervention involves central banks buying or selling currencies to stabilize the exchange rate. This is commonly done to prevent the domestic currency from appreciating or depreciating too much.
- Monetary policy refers to the use of interest rates, reserve requirements, and other tools to influence the supply of money and credit in the economy. In the context of fixed exchange rates, central banks can adjust monetary policy to help maintain the target exchange rate.
- Foreign exchange controls involve restrictions on the buying and selling of foreign currency. This can be enforced through things like import/export regulations, capital controls, and restrictions on foreign investment. By limiting the supply of foreign currency, foreign exchange controls can help maintain a fixed exchange rate.

Which of the Following Is a Method to Maintain a Fixed