Buying and selling foreign currency by the central bank is a trade policy whose objective is:
A)stabilizing the exchange rate against external shocks.
B)stabilizing the interest rate against foreign capital outflows.
C)promoting long term economic growth.
D)reducing purchases of assets abroad.

Question

Quizplus · Accepted Answer

The central bank buys and sells foreign currency to stabilize the exchange rate, protecting the economy from external shocks that can cause volatility.

Buying and Selling Foreign Currency by the Central Bank Is