Stabilization function
Hedging function
Credit function
Transfer function
Answer is Right!
Answer is Wrong!
The correct answer is: C. Credit function
The foreign exchange market is a global marketplace where currencies are bought and sold. It is the largest financial market in the world, with an average daily turnover of over $5 trillion.
The foreign exchange market serves a number of important functions, including:
- Stabilization function: The foreign exchange market helps to stabilize the value of currencies and reduce volatility in the global economy.
- Hedging function: The foreign exchange market allows businesses and individuals to hedge against the risk of changes in exchange rates.
- Transfer function: The foreign exchange market allows people and businesses to transfer money from one country to another.
- Liquidity function: The foreign exchange market provides liquidity for international trade and investment.
The credit function is not a function of the foreign exchange market. The credit function is the provision of loans and other forms of credit. This is done by banks and other financial institutions. The foreign exchange market does not provide credit.
Here is a brief explanation of each option:
- Stabilization function: The foreign exchange market helps to stabilize the value of currencies and reduce volatility in the global economy. This is done by allowing buyers and sellers of currencies to exchange them at a price that reflects the supply and demand for each currency.
- Hedging function: The foreign exchange market allows businesses and individuals to hedge against the risk of changes in exchange rates. This is done by buying or selling currencies in the future at a predetermined price.
- Transfer function: The foreign exchange market allows people and businesses to transfer money from one country to another. This is done by buying or selling currencies at the current exchange rate.
- Liquidity function: The foreign exchange market provides liquidity for international trade and investment. This is done by allowing buyers and sellers of currencies to exchange them quickly and easily.