To prevent the external value of the currency from falling the government might ?
Correct answer: C. Buy its own currency with foreign reserves
- A. Reduce interest rates
- B. Sell its own currency
- C. Buy its own currency with foreign reserves
- D. Increase its own spending
Explanation
To support a falling currency, the central bank buys its own currency in the foreign-exchange market and pays with foreign reserves, reducing the currency supplied for sale. Selling its own currency would increase downward pressure on its value.
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