BW 022

1)      Describe a fixed exchange rate system and explain the actions required to maintain currency x fixed.

2)      Draw and explain quota graph.

1) When the value of a currency is pegged (fixed) to the value of:

a.       another currency

b.      the average value of a selection of currencies

c.       the value of a commodity (gold for example)

If a currency devalues then the coutry will need to buy its currency on the forex to increase D then the exchange rate increases

If a currency  revalues then the country will need to sell its currency on the forex, to increase S then decrease the exchange rates

2)           

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgK2kLnun3pkByO84496ZBYJmekJhjfd42vFKgsl633qQIU60uwIK-IuEgn1iMlYfgjxn2zpUjCHwGt6YFF-1DYrxypk7O4kG_2oFOI6j4U8I7sstwLTpGAPAHqhG6t4yDrPb3IutI8HyY/s1600/Quota.jpg