CAIE A-Level Economics A2 11.2.2 Fixed Managed Exchange Rates Questions

Practise showing how central banks maintain fixed rates or bands through reserves, interest rates and controls and compare intervention with a managed float.

Syllabus
2026–2028
Course
Economics 9708
Level
A2

Exam points

  • Explain how central banks maintain fixed or managed exchange rates through reserves, interest rates and controls under market pressure.

CAIE A-Level Economics A2 11.2.2 Fixed Managed Exchange Rates Questions question 1

[Maximum number: 1]

A country with demand-pull inflation decides to fix its exchange rates against other currencies above the purchasing power parities.

What is likely to happen to the macroeconomic indicators shown?

interest rate

inflation rate

current account
balance

decrease

decrease

improve

decrease

increase

worsen

increase

decrease

worsen

increase

increase

improve

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