If a government is going to "support" its own currency, it will ____.

Question

Quizplus · Accepted Answer

If a government is going to "support" its own currency, it will need to increase demand for its currency, which can be done by buying more of its own currency on the foreign exchange market. This increase in demand will lead to an increase in the value of the currency relative to others. Selling more of its own currency or reducing exports would have the opposite effect, decreasing demand and lowering the value of the currency. Importing more foreign goods would not necessarily have an impact on the value of the currency.

If a Government Is Going to "Support" Its Own Currency