Foreign Exchange Market Intervention Is Most Effective When

question 50

Multiple Choice

Foreign exchange market intervention is most effective when:

• A)each country's political leaders agree to cooperate fully with the process.
• B)leading economists in each country concur that intervention is needed.
• C)permanent differences between the free market exchange rate and the fixed exchange rate are expected.
• D)temporary differences between the free market exchange rate and the fixed exchange rate are expected.
• E)all the countries restrict the international movement of goods and services.

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Definitions:

Vertical Axis

The vertical axis in a graph or chart is the y-axis, representing the quantity or degree of the variable measured.

Capital Market

A financial market in which long-term debt or equity-backed securities are bought and sold, different from the short-term funds seen in the money market.

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price.

Output Price

The cost at which goods or services are offered for sale in the marketplace.