Economic Awareness - Sectors of Indian Economy
Which exchange rate system is characterized by a currency value that is strictly pegged to another currency or a basket of currencies and maintained by the central bank?
Which exchange rate system is characterized by a currency value that is strictly pegged to another currency or a basket of currencies and maintained by the central bank?
easy Q11 of 15
Step-by-Step Solution
Step 1: Identify the concept
The question tests knowledge of the fixed exchange rate system, where currency value is pegged and maintained by the central bank.Step 2: Apply the concept
Fixed exchange rate means the currency does not fluctuate freely but is tied to another currency or basket, with central bank intervention to maintain the peg.Final Answer:
Fixed Exchange Rate → Option BQuick Check:
Fixed exchange rate = currency pegged and maintained by central bank ✅
Quick Trick: Fixed = Firm peg maintained by central bank.
Common Mistakes:
MISTAKES- Confusing fixed with managed float which allows some market movement.
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