ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Fixed
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mixed
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managed
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flexible
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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: -A fixed exchange rate, often called a pegged exchange rate, is a type of exchange rate regime in which a currency’s value is fixed or pegged by a monetary authority against the value of another currency, a basket of other currencies, or another measure of value, such as gold.
Detailed explanation-3: -Under a pegged exchange rate regime, a country will peg the value of its currency to that of a major currency, so that if the reference currency rises in value, its own currency rises too.
Detailed explanation-4: -The formula is: Starting Amount (Original Currency) / Ending Amount (New Currency) = Exchange Rate. For example, if you exchange 100 U.S. Dollars for 80 Euros, the exchange rate would be 1.25.