Asked by Abagail Marie Minnick on Jul 21, 2024
Verified
A fixed exchange rate is enforced by:
A) national governments,who establish appropriate trade barriers for each country they trade with.
B) national governments,who manipulate gold reserves appropriately.
C) central banks,who buy and sell appropriate currencies.
D) the International Monetary Fund,which offers loans to its member countries.
E) local governments,who manipulate capital reserves appropriately.
Fixed Exchange Rate
Rate of exchange between currencies pegged within a narrow range and maintained by the central bank’s ongoing purchases and sales of currencies.
Central Banks
National financial institutions that provide financial and banking services for a country's government and commercial banking system, as well as implementing the government's monetary policy and issuing currency.
Trade Barriers
Measures imposed by governments to regulate international trade, often to protect domestic industries from foreign competition.
- Recognize the mechanisms and implications of fixed and floating exchange rate systems.
Verified Answer
JO
Julius OrengeJul 27, 2024
Final Answer :
C
Explanation :
A fixed exchange rate is maintained by central banks through buying and selling appropriate currencies to maintain a fixed value of their currency relative to another currency or a basket of currencies. National governments may also be involved in this process, but it is ultimately the responsibility of the central bank. The other options listed do not accurately describe how a fixed exchange rate is enforced.
Learning Objectives
- Recognize the mechanisms and implications of fixed and floating exchange rate systems.