Question

A pegged exchange rate means the value of the currency is fixed relative to a reference currency, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.
(A) True
(B) False

Answer 1

Answer: True

Explanation: When the central monetary authority of a country attaches the value of their country's currency in relation to any other country's currency, then such an arrangement is called pegged exchange rate system.

The reference currency used by the authorities are generally of those countries which have a strong monetary base like US dollar or Euros.

Hence, from the above we can conclude that the given statement is true.