Question

The value of Surnum's, a developing economy, currency is fixed relative to the U.S. dollar. The exchange rate between the Surnum currency and other currencies is determined by the dollar exchange rate. Surnum's exchange rate is

Answer 1

Answer:

Surnum's exchange rate is pegged.

Explanation:

Exchange rate is the rate at which a countrie's currency is exchanged for another. Usually when there is more demand for a countrie's currency it will have more value than other currencies and vice versa.

There are two ways a countrie's currency rate can be controlled in relation to others.

First is by market forces of demand and supply.

Secondly is by pegging the countrie's currency against another and using reserves of the other currency to account for market fluctuations.

In this instance Surnum has pegged it's currency against the dollar, so it will use its dollar reserves to account for fluctuations in order to maintain the pegged exchange rate.