Under Managed Floating Exchange Rates, Central Bank Intervention Is Used

question 148

True/False

Under managed floating exchange rates, central bank intervention is used to offset temporary fluctuations in exchange rates that contribute to uncertainty in carrying out transactions in international trade and finance.

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Definitions:

Automatic Stabilizers

Economic policies and programs, such as unemployment benefits and progressive taxation, that automatically help stabilize an economy by increasing spending in a downturn and reducing spending in an upswing without additional government action.

Private Spending

Private Spending is the total expenditures by individuals and businesses in an economy, excluding government spending and investment.

Transfer Payments

Payments made by the government to individuals or organizations without requiring any goods or services in return, such as welfare checks or social security.

Business Cycle

The fluctuations in economic activity that an economy experiences over a period, typically characterized by expansion (growth) and contraction (recession) phases.