Given the daily volume of foreign-exchange transactions, it is most accurate to say which of the following?
A)It is impossible for a government's interventions in the foreign-exchange market to affect market psychology.
B)A government's intervention in the foreign-exchange market can reverse a currency's slide for the long term.
C)A government's intervention cannot force the foreign-exchange market to move in a determined direction.
D)A government should focus more on intervening in foreign-exchange markets than on correcting economic fundamentals.

Question

Quizplus · Accepted Answer

The daily volume of foreign-exchange transactions is incredibly high, often in the trillions of dollars, making it difficult for any one entity, including governments, to have a significant impact on the market's direction. While a government's intervention can cause a short-term shift, it cannot force the market to move in a specific direction, making choice C the most accurate. Choices A and D are not accurate as they suggest that government intervention is either impossible or the most effective solution, which is not necessarily the case. Choice B is also not entirely accurate as a currency's slide can be influenced by a government's intervention, but it does not guarantee a long-term reversal.

Given the Daily Volume of Foreign-Exchange Transactions, It Is Most