Whengovernment intervention attempts to reduce for exporters and importers the uncertainty caused by disruptive exchange rate changes for the short and medium term,it is referred to as _________.
A)smoothing out daily fluctuations
B)leaning against the wind
C)unofficial pegging
D)a dirty float

Question

Quizplus · Accepted Answer

Leaning against the wind refers to the government's efforts to reduce the negative effects of disruptive exchange rate changes by intervening in the foreign exchange market. This intervention is intended to provide stability and reduce uncertainty for exporters and importers in the short and medium term. Choice A refers to smoothing out daily fluctuations and is not specifically focused on reducing uncertainty caused by exchange rate changes. Choice C refers to pegging, which involves fixing the exchange rate at a certain level, rather than intervening to reduce uncertainty. Choice D refers to a situation where a currency's value is allowed to fluctuate freely, with occasional government intervention to influence the direction of the change. While this intervention may help reduce uncertainty, it is not specifically focused on the short and medium term or on exporting and importing.

Whengovernment Intervention Attempts to Reduce for Exporters and Importers the Uncertainty