MANAGEMENT

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: -In a fixed exchange rate system, a country’s central bank typically uses an open market mechanism and is committed at all times to buy and/or sell its currency at a fixed price in order to maintain its pegged ratio and, hence, the stable value of its currency in relation to the reference to which it is pegged.

Detailed explanation-3: -The correct answer is Fixed exchange rates are rates set by Government decisions and Maintained by Government actions. An exchange rate is the value of one nation’s currency versus the currency of another nation or economic zone.

Detailed explanation-4: -Statement 2 is incorrect: Devaluation is the decrease in price of the domestic currency under a fixed or pegged exchange rate system.