1). Following each statement, write in the name of the exchange – rate regime you think best describes the regime.

a). The value of the currency is anchored to a given value of another currency and can only deviate by a little as 0.5 percent above or 0.5 percent below that value.

b). The value of the currency is anchored to a given value of another currency and can only deviate by as little as 1 percent above or 1 percent below that value. That value, however, is increased every trading period.

c). Only the forces of supply and demand determine the value of the currency.

d). The value of the currency is anchored to the weighted – average value of a selected group of currencies.

e). The currency authority anchors the value of the domestic currency one – to – one to the euro. The authority will issue domestic currency notes only when its reserves of the euro rise.

f). The domestic currency has been replaced with the euro and the euro is the sole legal tender, but the domestic country is not part of the European Monetary Union.

g). Monetary authorities pretty much let the currency value be determined by market forces, but they will intervene from time to time to move the value in the “right” direction.

2). What factors do you think should be considered when determining the rate of crawl for a crawling – peg exchange – rate system?

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1 a The value of the currency is anchored to a given value of another currency and can only deviate ... View the full answer