When the Government Is the Sole Depository of Foreign Currencies

Multiple Choice

When the government is the sole depository of foreign currencies and exercises complete control over how these currencies may be used, this

A) is a violation of International Monetary Fund regulations for member countries because it denies the right of market forces to determine exchange rates
B) creates equilibrium in the foreign exchange market which would otherwise not occur
C) is an example of exchange controls that allow a government to maintain a fixed exchange rate
D) is necessary in a floating exchange rate system to keep the market in equilibrium
E) stimulates international trade because it eliminates all the uncertainty associated with floating exchange rates