Question

How would you define exchange control?

a. the government allocates foreign exchange through decree rather than through the market.
b. a country not pegging its exchange rate
c. a country pegging its exchange rate
d. a country buying up excess current account so that ca

Answer 1

Exchange control refers to the government's regulation and management of a country's foreign exchange market. It involves measures taken by the government to influence the supply and demand of foreign currency.

Step-by-step explanation:

Exchange control refers to the government's regulation and management of a country's foreign exchange market. It involves measures taken by the government to influence the supply and demand of foreign currency.

Option a is the correct definition of exchange control. It states that the government allocates foreign exchange through decrees rather than through the market. By doing so, the government can control the availability and allocation of foreign currency in the country.

For example, a government may restrict the amount of foreign currency that individuals or businesses can purchase or implement a fixed exchange rate to stabilize the value of the domestic currency. These measures aim to protect the country's economy and ensure the efficient use of foreign exchange resources.