- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics
- Reading 10. Currency Exchange Rates: Understanding Equilibrium Value
- Subject 7. Exchange Rate Management: Intervention and Controls
CFA Practice Question
According to IMF guidelines, which case would require the least amount of central bank intervention in response to unwanted capital inflows?
A. Its inflation rate is low.
B. Its currency is undervalued.
C. Its short-term interest rates are low.
Explanation: An undervalued currency would lessen the probability of intervention, sterilized or unsterilized, when a country is facing unwanted capital inflows.
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