Question

If the United Kingdom enters into an agreement with other countries to keep the exchange rate among their currencies fixed, what is it taking part in?

1) Fixed exchange rate system
2) Floating exchange rate system
3) Pegged exchange rate system
4) Managed float exchange rate system

Answer 1

The United Kingdom is taking part in a Pegged exchange rate system when it enters into an agreement with other countries to keep the exchange rate among their currencies fixed.

Step-by-step explanation:

When the United Kingdom enters into an agreement with other countries to keep the exchange rate among their currencies fixed, it is taking part in a Pegged exchange rate system. In a pegged exchange rate system, the government intervenes to manage the value of the exchange rate and keep it fixed to a specific level. This is different from a floating exchange rate system, where the foreign exchange market determines the rates.