The Central Bank practice of the active buying and selling of the domestic currency against foreign currencies is the process of
A) direct intervention.
B) indirect intervention.
C) coordinated intervention.
D) capital controls.

Question

Quizplus · Accepted Answer

The practice of active buying and selling of domestic currency against foreign currencies is a form of direct intervention by the central bank. This is because the central bank is directly involved in the foreign exchange market by actively buying and selling currencies to influence the value of the domestic currency. Indirect intervention, on the other hand, refers to policies or actions that affect exchange rates indirectly, such as changes in interest rates. Coordinated intervention involves multiple central banks working together to influence exchange rates, while capital controls are restrictions imposed by a government on the movement of capital across borders.

The Central Bank Practice of the Active Buying and Selling