ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Flexible exchange rate
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Fixed exchange rate
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Floating exchange rate
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None of these
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Detailed explanation-1: -A fixed exchange rate is a regime applied by a government or central bank that ties the country’s official currency exchange rate to another country’s currency or the price of gold. The purpose of a fixed exchange rate system is to keep a currency’s value within a narrow band.
Detailed explanation-2: -fixed exchange rate. The rate that is determined by the government is called the fixed exchange rate.
Detailed explanation-3: -There are also four countries that maintain a fixed exchange rate, but for a basket of currencies rather than a single currency: Fiji, Kuwait, Morocco, and Libya.
Detailed explanation-4: -A fixed exchange rate denotes a nominal exchange rate that is set firmly by the monetary authority with respect to a foreign currency or a basket of foreign currencies. By contrast, a floating exchange rate is determined in foreign exchange markets depending on demand and supply, and it generally fluctuates constantly.