When a Government Buys or Sells Foreign Exchange in the Foreign

question 137

Multiple Choice

When a government buys or sells foreign exchange in the foreign exchange market in order to alter the supply or demand for currency and push the exchange rate in a desired direction, this is known
As

• A) monetary policy.
• B) an inflationary peg.
• C) sterilization.
• D) a currency intervention.

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Definitions:

Total Cost

The complete cost of production, including both fixed and variable costs incurred in the creation of a good or service.

Purely Competitive Firm

A business operating in a market where there are many buyers and sellers, each with negligible impact on the price of goods and services.

Economic Profit

The variance between collective earnings and complete expenditures, encompassing both overt and covert costs.

Normal Profit

The minimum amount of profit needed for a company to remain competitive in the market; it equals the total opportunity costs of a firm.