Question : A country's central bank can intervene in the foreign exchange market to influence the value of its currency. This is known as ________.
Option 1: exchange rate targeting
Option 2: currency manipulation
Option 3: foreign exchange intervention
Option 4: exchange rate pegging
Correct Answer: foreign exchange intervention
Solution : The correct answer is (c) foreign exchange intervention.
Foreign exchange intervention refers to the actions taken by a country's central bank or monetary authority to influence the value of its currency in the foreign exchange market. These interventions can include buying or selling foreign currency reserves to increase or decrease the demand for the domestic currency, thus impacting its exchange rate. The aim of foreign exchange intervention is to manage or stabilize the exchange rate and address any excessive volatility or imbalances in the currency market.
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