Question

Governments intervene in the foreign exchange markets for all of the following EXCEPT to 1) Earn foreign exchange 2) Reduce economic uncertainty 3) Improve the nation's export competitiveness 4) Reduce inflation 5) None of the given answers

Answer 1

Answer:

Option (1) is correct.

Explanation:

Government intervene in the foreign exchange markets for maintaining the inflation rate at its lower level in an economy, improving the country's exports by increasing the competition among the firms, so that there is an inflow of foreign currency into the home country and minimize the economic uncertainty which can affect the economy in a negative way.

Therefore, the government doesn't intervene in the forex market for earning foreign exchange because it is not a main objective.