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:

Government Securities

Financial instruments issued by the government to finance its expenditures, offering a relatively safe investment.

Money Market Accounts

Savings accounts that typically offer higher interest rates in exchange for larger deposit balances, with limited transaction privileges.

Cash

Cash represents money in the physical form of currency, such as banknotes and coins, that is used to conduct transactions.

Financing Activity

Transactions between a business and its financiers, such as issuing debt or equity.