Unit 4.5 · Exchange Rates
Fixed Exchange Rates
AO2AO4Diagram required
Syllabus Requirement
Explains how fixed exchange rates are maintained and the concepts of devaluation and revaluation.
Assessment Objectives
AO2Application and Analysis
AO4Use of Appropriate Skills
Summary
Fixed exchange rates are established by governments to maintain a stable value of their currency against another currency or a basket of currencies. This system can positively influence a country's current account balance, economic growth, and employment levels by stabilizing trade conditions.