The central bank of the United Kingdom could prevent the pound from appreciating by:
A) Selling pounds on the foreign exchange market
B) Buying pounds on the foreign exchange market
C) Reducing its inflation rate relative to its trading partners
D) Promoting domestic investment and technological development

Question

Quizplus · Accepted Answer

By selling pounds on the foreign exchange market, the central bank can increase the supply of pounds, making them more available to buyers and therefore reducing their value. This can prevent the pound from appreciating. Buying pounds on the foreign exchange market would have the opposite effect and increase the value of the pound. Reducing inflation rate and promoting domestic investment may impact the exchange rate in the long run, but they are not direct methods to prevent the pound from appreciating in the short run.

The Central Bank of the United Kingdom Could Prevent the Pound