Question

The currency of Panama, the balboa, is fixed relative to the U.S. dollar. As a result, the U.S. dollar exchange rate determines the exchange rate between the Panama balboa and other currencies. This is an example of a _____ exchange rate.

Answer 1

Fixed exchange rate.

Step-by-step explanation:

The system in which a currency's value is with the value of another currency is known fixed exchange rate.

There are numerous benefits of fixed exchange rate as it can stabilise the value of currency because the value of one currency is fixed in a prefixed ratio to more internationally acceptable currency. In this the exchange rate does not fluctuate with the market conditions and make the trade and investment between the two currencies easier.