What is a characteristic of a fixed exchange rate?

A fixed exchange rate is characterized by its stability, meaning it remains constant regardless of fluctuations in market conditions. This system is often maintained by a country's central bank, which intervenes in the foreign exchange market as necessary to ensure that the currency's value does not vary significantly. The goal of a fixed exchange rate regime is to provide greater predictability for international trade and investment, as businesses can plan without the concern of sudden currency depreciation or appreciation.

In contrast, the other options describe characteristics associated with flexible or floating exchange rate systems, where the value of currency is determined by supply and demand in the market and can fluctuate based on various factors, including macroeconomic indicators and inflation rates. Such variability can introduce uncertainties that fixed exchange rates seek to mitigate, making the constant nature of a fixed exchange rate a distinctive and paramount characteristic.