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    Question

    The primary function of the foreign exchange market in

    an open economy is to:​ 
    A Fix exchange rates permanently Correct Answer Incorrect Answer
    B Facilitate international trade and capital flows Correct Answer Incorrect Answer
    C Replace domestic money markets Correct Answer Incorrect Answer
    D Eliminate currency risk Correct Answer Incorrect Answer
    E Control domestic inflation directly Correct Answer Incorrect Answer

    Solution

    The forex market enables cross-border trade, investment, and remittances.​  Exchange rates are market-determined in most regimes.​  Currency risk is managed, not eliminated.​  Inflation control remains a monetary policy function 

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