Describe the fixed exchange rate monetary system.

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Describe the fixed exchange rate monetary system.

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Describe the fixed exchange rate monetary system.

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Fixed exchange rate system is a system where the central bank of the country uses an open market mechanism and is responsible to buy or sell the country's currency at a fixed price, in order to maintain its pegged ratio. Pegged ratio or rate can be determined by value of one ounce of gold per unit of currency, or any other relevant measure which the central bank deems fit. Thus, this can stabilize the value of its currency in relation to the reference, to which it is pegged.

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