Governments can affect exchange rates by encouraging or discouraging foreign investment.

Question

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Governments can affect exchange rates by implementing policies that encourage or discourage foreign investment in their country. If they create favorable conditions for foreign investors, such as tax breaks or relaxed regulations, it can attract more foreign capital and strengthen their currency. On the other hand, if the government creates unfavorable conditions, it can discourage foreign investment and lead to a weaker currency.

Governments Can Affect Exchange Rates by Encouraging or Discouraging Foreign