Question

Based on this graph, why are there upper and lower limits for the $?
A) This graph is indicating a floating exchange rate that moves freely, but has suggested upper and lower limits.
B) This graph is indicating a gold standard has been put in place to keep the rate outside of the upper and lower limits.
C) This graph is indicating the Breton Woods System fostering the usage of gold to support the exchange of paper currency.
D) This graph is indicating a fixed exchange rate that prevents the foreign exchange rate from moving outside of the upper and lower limits.

Answer 1

This graph is indicating a fixed exchange rate that prevents the foreign exchange rate from moving outside of the upper and lower limits.

Answer: Option D.

Explanation:

A fixed exchange rate, now and again called a pegged exchange rate, is a kind of swapping scale system in which a cash's worth is fixed or pegged by a money related authority against the estimation of another money, a container of different monetary forms, or another proportion of significant worth, for example, gold.

In this case, the exchange rate is fixed because the limits are fixed in this case.