Explain How a Central Bank Would Engage in Direct Intervention

question 40

Essay

Explain how a central bank would engage in direct intervention to decrease the value of its domestic currency. Since the 1970s, it has been difficult for central banks alone to engage in direct intervention to alter the value of their domestic currency. Identify and explain at least two other activities in which a central bank could engage to alter the value of their domestic currency.

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Definitions:

Dividend Revenue

Income received from owning shares in a company, typically distributed from the company's profits.

Partial Goodwill Method

An accounting method where goodwill is only calculated and recorded for the parent's share of ownership in a subsidiary, not for minority interests.

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its net identifiable assets.

Share Capital

The funds raised by a company through the issuance of shares to its shareholders, representing the ownership of the company.