Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
To facilitate international trade by allowing currency conversion
B
To regulate government spending
C
To determine interest rates
D
To issue national currencies
Understanding the Answer
Let's break down why this is correct
Answer
The primary function of the foreign exchange market is to facilitate the buying and selling of currencies, which is essential for international trade. When a country imports goods, it needs to pay for them in the currency of the exporting country, which requires exchanging its own currency for that currency. This exchange affects the trade balance, as a country with a trade deficit (importing more than it exports) will need to buy more foreign currency, leading to changes in the demand for its own currency. For example, if the United States imports a lot from Japan, it will need to buy Japanese yen, impacting the value of the U. S.
Detailed Explanation
The foreign exchange market helps countries trade by letting them change their money into different currencies. Other options are incorrect because Some might think this market controls how much the government spends; People may believe this market sets interest rates.
Key Concepts
Foreign exchange market
Topic
Currency Exchange and Trade Balance
Difficulty
easy level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.