A country that introduces a currency board commits itself to convertin

QUESTION

A country that introduces a currency board commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.

Indicate whether the statement is true or false.

ANSWER

TRUE
A country that introduces a currency board commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate. To make this commitment credible, the currency board holds reserves of foreign currency equal at the fixed exchange rate to at least 100 percent of the domestic currency issued.