Question

In a ___ exchange rate system, the values of a set of currencies are set against each other at some mutually agreed-on exchange rate.

a. clean float

b. floating

c. fixed

d. dirty-float

e. pegged

Answer 1

In a fixed(pegged) exchange rate system,the values of a set of currencies are set against each other at some mutually agreed-on exchange rate.

The fixed exchange or pegged exchange rate system in which the central government of the country which is set against a foreign currency or a basket of foreign currencies.The set price is usually against a major world currency like the U.S dollar.The central bank of the country buys and sells its own currency in the international market in return of the currency that it has pegged for in order to maintain its local exchange rate.Fixed exchange rate system bring stability while making foreign investments as the value of investments are known at certainty.

(Fixed exchange rate are also known as pegged exchange rate system ,any two of the options are the right answer