Asked by Megan Campbell on Jul 26, 2024

verifed

Verified

To maintain a fixed exchange rate, the government can use the following tools, except

A) currency market intervention.
B) controlling the flow of trade through various barriers.
C) rationing of foreign exchange.
D) keeping its level of international reserves strictly fixed.

Fixed Exchange Rate

A system where the value of a currency is set to a specific rate against another currency or basket of currencies.

Currency Market Intervention

Involves central banks or other monetary authorities buying or selling currencies to influence exchange rates.

Foreign Exchange

Foreign Exchange involves the trading of currencies against one another, facilitating international trade and investment.

  • Comprehend the instruments that governments utilize to uphold stable exchange rates.
verifed

Verified Answer

NL
Neftaly LopezJul 28, 2024
Final Answer :
D
Explanation :
To maintain a fixed exchange rate, a government can intervene in currency markets, control trade flows, and ration foreign exchange. However, keeping international reserves strictly fixed is not a method for maintaining a fixed exchange rate; instead, adjusting reserves is a tool used in the process of managing the exchange rate.