Government purchases or sales of currency in the foreign exchange market constitute: I. a floating exchange rate regime.
II) foreign exchange controls.
III) exchange market intervention.

Question

Quizplus · Accepted Answer

Government purchases or sales of currency in the foreign exchange market is called exchange market intervention. It is a policy tool used to influence the exchange rate between currencies. A floating exchange rate regime means that the exchange rate is determined by the market forces of supply and demand without government intervention. Foreign exchange controls refer to regulations imposed by a government to restrict the buying and selling of foreign currencies by its citizens or businesses. As such, only statement III describes government purchases or sales of currency in the foreign exchange market.

Government Purchases or Sales of Currency in the Foreign Exchange