Answer the following questions regarding indirect intervention. a. Why would the Fed's indirect intervention have a...

Answer the following questions regarding indirect intervention.

a. Why would the Fed's indirect intervention have a stronger impact on some currencies than others?

b. Why would the Fed's indirect intervention have a stronger impact than its direct intervention

Solutions

Expert Solution

Answer (a) The Fed's indirect intervention would have a stronger impact on some currencies than others because The intervention has a very strong or powerful effect when the market is less active or we say inactive for the given currency because the intervention can shocked or affect the demand and supply conditions more

Answer (b) The Fed's indirect intervention have a stronger impact than its direct intervention because a Fed's indirect intervention may affect all the factors that influenced the interest rates and therefore this can affect the exchange rate of natural equilibrium. If we say oppositely means conversely direct intervention is a method which affect the demand and supply conditions for a currency and that is overwhelmed or based on th market forces.

Answer (c) The Motivations of the IMF are as follows :-

1. It promotes the stability of the exchange rates and the open systems for the payments at international level.

2. IMF provides a forum on monetary problems at international level for cooperation.

3. It helps in the creation of job and also economic growth

4. IMF helps in the growth of the international trade.

jeff jeffy answered 1 year ago

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