Who is largely involved in the determination of a fixed exchange rate?Multiple choice question.The governmentExportersImportersMultinational companies.
Question
Who is largely involved in the determination of a fixed exchange rate?
- Government
- Exporters
- Importers
- Multinational companies.
Solution
The determination of a fixed exchange rate is largely the responsibility of the government. This is because the government, often through its central bank, sets and maintains the fixed exchange rate by intervening in the foreign exchange market. This intervention generally involves buying or selling its own currency to control its value in relation to others.
- Exporters and importers might influence exchange rates through their trading activities, but they do not set exchange rates.
- Multinational companies can engage with different currencies, but they are typically subject to the rates that the government has established.
Thus, the correct answer to the question is: The government.
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