When more than one central bank attempts to shift the equilibrium exchange rate, we refer to this as:
A)sterilization.
B)a currency crisis.
C)coordinated intervention.
D)an application of special drawing rights.
E)a floating exchange rate system.

Question

Quizplus · Accepted Answer

Coordinated intervention occurs when multiple central banks intervene in the foreign exchange market at the same time in an attempt to shift the equilibrium exchange rate. Sterilization refers to the process of offsetting the effects of foreign exchange intervention on the money supply. A currency crisis is a sudden and sharp depreciation of a currency, often caused by a lack of confidence in the economy or government. Special drawing rights (SDRs) are international reserve assets created by the International Monetary Fund (IMF) and allocated to its member countries. A floating exchange rate system is one where the exchange rate is determined by market forces, without intervention by central banks.

When More Than One Central Bank Attempts to Shift the Equilibrium