Which of the following mechanisms cannot be adopted by a country to defend a fix
ID: 1100062 • Letter: W
Question
Which of the following mechanisms cannot be adopted by a country to defend a fixed exchange rate?
The government can buy or sell foreign currency in order to influence the actual exchange rate.
The government can allow the currency to self-adjust and the resulting market rate will be equal to the intended rate in the fixed exchange rate regime.
The government can impose a form of exchange control.
The government can alter domestic interest rates in order to influence short-term capital flows.
A.The government can buy or sell foreign currency in order to influence the actual exchange rate.
B.The government can allow the currency to self-adjust and the resulting market rate will be equal to the intended rate in the fixed exchange rate regime.
C.The government can impose a form of exchange control.
D.The government can alter domestic interest rates in order to influence short-term capital flows.
Explanation / Answer
The government can buy or sell foreign currency in order to influence the actual exchange rate.
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