Under the Managed Floating Exchange Rate System, a Government May

question 103

Multiple Choice

Under the managed floating exchange rate system, a government may be able to reduce the international value of its currency by:

• A)selling its currency in the foreign exchange market.
• B)buying its currency in the foreign exchange market.
• C)selling foreign currencies in the foreign exchange market.
• D)increasing its domestic interest rates.

---

Definitions:

Liquidity

A measure of a company's or individual's ability to meet short-term obligations, often associated with the ease of converting assets into cash.

Liabilities

Financial obligations or debts that a company owes to external parties, which must be settled over time through the transfer of assets, provision of services, or other value.

Effective-Interest Method

An accounting technique used to amortize the discount or premium on bonds payable over the life of the bonds, more precisely matching interest expense with the accounting periods in which they are incurred.

Unamortized Bond Discount

The portion of a bond discount that has not yet been expensed to interest expense over the life of the bond.