ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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impose forex barriers
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Impose foreign trade barriers
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Intervene by buying and selling currency
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All above
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Detailed explanation-1: -The typical situation would be the increase in Dollar supply. If the government imposes a high tax on interest income earned from foreign investment, investors will be discouraged from exchanging the dollar for pounds. The result will be an increase in the exchange rate rather decrease.
Detailed explanation-2: -System: Exchange rates are allowed to move freely on a daily basis and no official boundaries exist. However, governments may intervene to prevent the rates from moving too much in a certain direction. A government may manipulate its exchange rates such that its own country benefits at the expense of other countries.
Detailed explanation-3: -A fixed or pegged rate is determined by the government through its central bank. The rate is set against another major world currency (such as the U.S. dollar, euro, or yen). To maintain its exchange rate, the government will buy and sell its own currency against the currency to which it is pegged.
Detailed explanation-4: -Ëquilibrium rate of exchange is determined when the demand for foreign exchange is equal to its supply.
Detailed explanation-5: -Interest and inflation rates. Inflation is the rate at which the cost of goods and services rises over time. Current account deficits. Government debt. Terms of trade. Economic performance. Recession. Speculation. 06-Sept-2022