Question : What is the term used to describe a situation where a country's central bank fixes the value of its currency to another currency at a specified exchange rate?
Option 1: Currency intervention
Option 2: Currency hedging
Option 3: Currency manipulation
Option 4: Currency pegging
Correct Answer: Currency pegging
Solution : The correct answer is d) Currency pegging
Currency pegging refers to a situation where a country's central bank or monetary authority fixes the value of its currency to another currency, often a major currency like the US dollar or the euro, at a specified exchange rate. The purpose of currency pegging is to maintain stability in the exchange rate and provide a predictable environment for international trade and investment. The central bank intervenes in the foreign exchange market as needed to ensure that the currency remains within the specified exchange rate range.
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