Question : What is the term used to describe a situation where a country's central bank actively buys or sells its own currency in the foreign exchange market to influence its value?
Option 1: Currency manipulation
Option 2: Currency pegging
Option 3: Currency arbitrage
Option 4: Currency intervention
Correct Answer: Currency intervention
Solution : The correct answer is d) Currency intervention
The term used to describe a situation where a country's central bank actively buys or sells its own currency in the foreign exchange market to influence its value is currency intervention. Currency intervention, also known as foreign exchange intervention or central bank intervention, refers to the actions taken by a central bank to influence the exchange rate of its currency.
Currency intervention can involve buying or selling the domestic currency in the foreign exchange market. If a central bank wants to weaken its currency, it may sell its own currency and buy foreign currencies, increasing the supply of the domestic currency in the market. Conversely, if a central bank wants to strengthen its currency, it may buy its own currency and sell foreign currencies, reducing the supply of the domestic currency.
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
Question : What is the term used to describe a situation where a country's central bank fixes the value of its currency to another currency at a specified exchange rate?
Option 1: Currency intervention
Option 2: Currency hedging
Option 3: Currency manipulation
Option 4: Currency pegging
Question : What is the term used to describe the rate at which a central bank buys or sells its own currency in the foreign exchange market?
Option 1: Spot exchange rate
Option 2: Nominal exchange rate
Option 3: Intervention exchange rate
Option 4: Forward exchange rate
Question : When the Government wants to strengthen the rupee, it ________ foreign currency and ______ domestic currency.
Option 1: Buys, Sells
Option 2: Sells, Sells
Option 3: Sells, Buys
Option 4: Buys, Buys
Question : What is the term used to describe the practice of a country manipulating its currency to gain an unfair trade advantage?
Option 1: Currency hedging
Option 2: Currency speculation
Option 3: Currency pegging
Option 4: Currency manipulation
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