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When a government intervenes so the exchange rate differs from the market outcome, it establishes a:
AA state subsidy
BA currency peg
CA trade tariff
DAn import quota
Answer & Solution
Correct answer: B. A currency peg
1. Intervention has a standard name in currency policy.
2. A floating rate leaves the market to set the value.
3. A government may intervene in the foreign exchange market instead.
4. When the rate differs from what the market would have produced, it establishes a peg.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 15 'Exchange Rates and International Capital Flows'_
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