A government can control the value of its currency by
A)increasing or decreasing the supply of money.
B)adjusting interest rates.
C)practicing arbitrage.
D)Both options a and b are true.
E)All of the above are true.

Question

Quizplus · Accepted Answer

A government can control the value of its currency by increasing or decreasing the supply of money and adjusting interest rates. By increasing the supply of money, the government can decrease the value of its currency, while decreasing the supply of money will increase the value of its currency. Similarly, by adjusting interest rates, the government can attract or repel foreign investments, which can have an impact on the value of its currency. Arbitrage, which involves taking advantage of price differences in different markets, is not a tool that governments typically use to control the value of their currency.

A Government Can Control the Value of Its Currency by