A country has experienced a rapid and unpredictable change in the value of its currency
in recent years. Its leaders decide that the country needs to adopt a new system that will
make it easier to predict changes in the currency's value from month to month. The
leaders decide to tie the country's currency to the price of gold. If gold becomes more
expensive, the country's currency will increase in value. If gold becomes cheaper, the
currency will fall in value.
Which sentence best describes the system the country has created?
A. The country has a trade-weighted exchange rate.
B. The country has set up a flexible exchange rate.
C. The country has gotten rid of its exchange rate.
D. The country has set up a fixed exchange rate.

A fixed exchange rate regime is one implemented by a government or central bank that ties a country's official currency exchange rate to the price of gold or another country's currency. The goal of a fixed exchange rate system is to keep the value of a currency within a narrow range.

In order to regulate the unusual fluctuation D, The country has set up a fixed exchange rate.

Therefore option D explains the Fixed exchange rate.

Learn more about Fixed exchange rates here:

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