The use of foreign exchange reserves to keep exchange rates constant over time is called A....

The use of foreign exchange reserves to keep exchange rates constant over time is called

A.

a floating exchange rate system.

B.

a fixed exchange rate system.

C.

barter exchange system.

D.

the Bretton Woods system.

Expert Solution

The right answer is option B, that is, a fixed exchange rate system, because under the fixed exchange rate system a country has to keep the exchange rate constant by using the foreign exchange reserves that it can use in the case of excess demand or excess supply of the foreign currency.

Rahul Sunny answered 1 year ago

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The use of foreign exchange reserves to keep exchange rates constant over time is called A....

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