Under a fixed system, the exchange rate:
A) fluctuates in response to changing economic conditions.
B) is maintained at a predetermined level by the central bank.
C) is changed at regular intervals by the central bank.
D) fluctuates in response to changes in the price of gold.

Question

Quizplus · Accepted Answer

Under a fixed system, the exchange rate is maintained at a predetermined level by the central bank. This means that the central bank will buy or sell its own currency in order to keep the exchange rate within a certain range. This is different from a floating exchange rate system where the value of the currency is determined by the market forces of supply and demand.

Under a Fixed System, the Exchange Rate