A fixed exchange rate
A) is a declared rate that is maintained by central bank intervention in the foreign exchange market
B) is a rate that is fixed by the forces of supply and demand
C) is a rate that is determined by trilateral arbitrage
D) "fixes" the value of a nation's price level
E) is a mechanism for eliminating a trade deficit

Question

Quizplus · Accepted Answer

A fixed exchange rate is a rate that is declared by a country's central bank and is then maintained through the intervention of the central bank in the foreign exchange market. The central bank buys or sells foreign currencies to keep the exchange rate at the declared level.

A Fixed Exchange Rate