ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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fixed exchange rate
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floating exchange rate
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Either A or B
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None of the above
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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: -The Reserve Bank of India, is the custodian of the country’s foreign exchange reserves and is vested with the responsibility of managing their investment. The legal provisions governing management of foreign exchange reserves are laid down in the Reserve Bank of India Act, 1934.