The buying and selling of 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 against external shocks, ensuring that the currency's value does not fluctuate too wildly due to sudden changes in the market or economic conditions. This helps maintain economic stability.

The Buying and Selling of Foreign Currency by the Central