A country with a fixed exchange rate experiences downward pressure on the exchange rate value of its currency. The central bank chooses to intervene in the market to maintain its fixed exchange rate. How would the central bank go about intervening? If the pressures for the currency to depreciate persist for a long period, even after successive interventions in the foreign exchange market, would it be difficult to maintain the fixed exchange rate? Why or why not? Give an example of a country that attempted to maintain its exchange rate in the face of downward pressures. What was the result?

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The Answer of A country with a fixed exchange rate experiences downward pressure on the exchange rate value of its currency. The central bank chooses to intervene in the market to maintain its fixed exchange rate. How would the central bank go about intervening? If the pressures for the currency to depreciate persist for a long period, even after successive interventions in the foreign exchange market, would it be difficult to maintain the fixed exchange rate? Why or why not? Give an example of a country that attempted to maintain its exchange rate in the face of downward pressures. What was the result?

A Country with a Fixed Exchange Rate Experiences Downward Pressure