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Economics · May / June 2026 · Paper 12 · Question 29

2281Foreign exchange rates

What describes a fixed exchange rate system?

  1. Athe central bank sets an inflation target
  2. Bthe government sets prices in the markets for goods
  3. Cthe money in the economy buys the same quantity of goods each year
  4. Dthe value of the currency is fixed against another currency

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Correct answer: D. the value of the currency is fixed against another currency

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