Which of the Following Mechanisms Cannot Be Adopted by a Country

question 11

Multiple Choice

Which of the following mechanisms cannot be adopted by a country to defend a fixed exchange rate?

• A)The government can buy or sell foreign currency in order to influence the actual exchange rate.
• B)The government can allow the currency to self-adjust and the resulting market rate will be equal to the intended rate in the fixed exchange rate regime.
• C)The government can impose a form of exchange control.
• D)The government can alter domestic interest rates in order to influence short-term capital flows.