PPSCFPSCNTSPakistan govt jobs
- Subject
- Foreign Exchangeeconomics-mcqs › foreign-exchange
- Published
- 1 Jun 2019
- Last updated
- 28 May 2026
Why does a floating exchange rate help the Bank of England combat inflation when it reduces the money supply?
Multiple choice question for Foreign Exchange. Select an option, then review the explanation below.
Explanation
When the Bank of England lowers the money supply, interest rates increase. Under a floating exchange rate, this tends to reduce the prices of both UK exports and imports, which supports efforts to reduce inflation.
More Foreign Exchange MCQs
Practice related questions from the same subject.
- 1.In a floating exchange rate system, what is the typical trend observed regarding currency values?
- 2.What term describes the increase in the value of one currency compared to another?
- 3.What is the typical impact of a fiscal expansion in the UK on the value of the pound sterling?
- 4.What do we call exchange rates that fluctuate based solely on market supply and demand without government intervention?
- 5.What type of exchange rate system was established by the agreements made at the 1944 Bretton Woods conference?