Question

The exchange permit can stipulate an unfavorable rate of exchange depending on the desires of the government.

A) True
B) False
C) Depends on the government's policies
D) Not addressed in the passage

Answer 1

The statement that an exchange permit can stipulate an unfavorable exchange rate depending on government desire is true. Governments navigate through different exchange rate policies and may set unfavorable rates to align with their economic strategies.

Step-by-step explanation:

The exchange permit can stipulate an unfavorable rate of exchange depending on the desires of the government. The correct answer is A) True. Governments have different exchange rate policies they can adopt, such as floating exchange rate policy, soft peg exchange rate policy, and hard peg exchange rate policy. In a floating exchange rate policy, the market usually sets the exchange rates, but the government can intervene. In a soft peg policy, there is typically some market determination with occasional government intervention to strengthen or weaken the currency. However, in a hard peg exchange rate policy, the government sets the exchange rate directly. These policies can lead to varying degrees of exchange rate flexibility and may influence the exchange rate to be favorable or unfavorable, based on what the government believes will benefit the country's economy. It is apparent that the government's policies can lead to unfavorable exchange rates if it suits their broader economic goals.