**Understanding Fixed Exchange Rate Systems**In a fixed exchange rate system:- **A.** The International Monetary Fund determines exchange rates.- **B.** Market forces play a role in determining the fixed value of a currency.- **C.** Market forces and the country's stock of gold determine its exchange rate.- **D.** A central bank affects the value of a currency by changing its foreign exchange reserves.**Explanation:**In fixed exchange rate systems, the value of a currency is pegged to another currency or a basket of currencies. Option B is highlighted, suggesting a focus on how market influences can still impact the value under this system. Central banks have a significant role in maintaining the fixed rate by adjusting their reserves.

An international exchange rate, also said as a foreign exchange rate. It is the price of a currency of one country in terms of the currency of another country. International exchange rates are expressed as one currency's value to another.The fixed exchange rate/pegged exchange rate is the regime in which the worth of the exchange rate of a country is kept unchanging to another country’s currency. In this system of the exchange rate, the government intervenes to keep the exchange rate fixed. The central bank intervenes in the market to change the foreign exchange reserve in order to keep the exchange rate fixed. Thus, the correct option is ‘d) a central bank affects the value of currency of a country by changing its foreign exchange reserve’.

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In a fixed exchange rate system, O A. the International Monetary Fund determines exchange rates. B. market forces play a role in determining the fixed value of a currency. C. market forces and the country's stock of gold determine its exchange rate. O D. a central bank affects the value of a currency by changing its foreign exchange reserves.

In a fixed exchange rate system, O A. the International Monetary Fund determines exchange rates. B. market forces play a role in determining the fixed value of a currency. C. market forces and the country's stock of gold determine its exchange rate. O D. a central bank affects the value of a currency by changing its foreign exchange reserves.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1.5
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