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:

Liability Account

A financial accounting account that represents obligations to pay debts or amounts owed to others.

Capital Account

An account showing the net worth of a business entity, including its equity and investments.

Asset Account

An account that records the assets owned by a company, showing their value on the balance sheet.

Cash Balance

The amount of cash or cash equivalents a company or individual possesses at any given time.