In a fixed-rate system central banks would NOT maintain currency values by
A)increasing the money supplies of nations with overvalued currencies
B)boosting the money supplies of nations with undervalued currencies
C)buying up overvalued currencies in the foreign exchange market
D)selling undervalued currencies in the foreign exchange market

Question

Quizplus · Accepted Answer

In a fixed-rate system, central banks maintain currency values by buying or selling currencies to keep exchange rates within a target range. Increasing the money supply of a nation with an overvalued currency would actually devalue the currency further, contrary to the goal of maintaining fixed exchange rates.

In a Fixed-Rate System Central Banks Would NOT Maintain Currency