In the context of exchange-rate regimes, a 'Currency Board' arrangement is characterised by:
A. A freely floating exchange rate
B. Complete monetary discretion without any reserve backing
C. Only a crawling peg
D. A fixed exchange rate backed by a full foreign-exchange reserve cover of the monetary base and limited monetary discretion
Answer: Option D
Solution (By JKSSB Mock Tests)
A currency board maintains a fixed exchange rate to an anchor currency, backs the entire monetary base with foreign reserves, and severely restricts the scope for discretionary monetary policy.
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