Buying and selling of foreign exchange to influence the exchange rate is referred to as:
A) capital controls
B) a managed float.
C) exchange controls.
D) sterilization.
E) intervention.

Question

Quizplus · Accepted Answer

The buying and selling of foreign exchange to influence the exchange rate is commonly referred to as intervention. This is often done by central banks or other governmental entities to stabilize or manipulate their currency's value. Choice A refers to restrictions on the flow of capital, while Choice B refers to a floating exchange rate system that is subject to market forces. Choice C refers to restrictions on the conversion of domestic currency to foreign currency. Choice D refers to a monetary policy tool used to offset the effects of foreign exchange intervention on the money supply.

Buying and Selling of Foreign Exchange to Influence the Exchange