In a Fixed Exchange Rate System

question 105

Multiple Choice

In a fixed exchange rate system

• A) market forces and the country's stock of gold determine its exchange rate.
• B) a central bank affects the value of a currency by changing its foreign exchange reserves.
• C) market forces play a role in determining the fixed value of a currency.
• D) the International Monetary Fund determines exchange rates.

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Definitions:

Compounded Monthly

An approach to interest calculation conducted every month, including both the initially loaned or deposited sum and the cumulatively gained interest from former periods.

Compound Increase

The growth of an amount where the increase over time accumulates on itself because the base amount changes due to additions made in previous periods.

Compounded Annually

The calculation and addition of interest to the principal once a year.

Nominal Rate

The interest rate before adjustment for inflation, not reflecting the real cost of borrowing or the real return on an investment.