Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
To stabilize the national currency's exchange rate
B
To increase foreign investment
C
To reduce inflation rates
D
To promote exports
Understanding the Answer
Let's break down why this is correct
Answer
The primary purpose of central bank interventions in the foreign exchange market is to stabilize or influence the value of their country's currency. When a currency fluctuates too much, it can create uncertainty for businesses and consumers, making it harder to plan for the future. For example, if a country's currency becomes too weak, imports can become more expensive, leading to inflation. By buying or selling their own currency, central banks can help manage these fluctuations and maintain economic stability. This intervention helps ensure that trade and investment continue smoothly, benefiting the overall economy.
Detailed Explanation
Central banks step in to help keep their country's money value steady. Other options are incorrect because Some might think that central banks intervene to attract more foreign money; People may believe that central banks focus on lowering prices in the economy.
Key Concepts
central bank interventions
Topic
Foreign Exchange Market Dynamics
Difficulty
easy level question
Cognitive Level
understand
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