If the Fed wants to lower the U.S. exchange rate, what action should it take in the foreign exchange market? Why does the action lower the exchange rate?
What will be an ideal response?
To lower the exchange rate, the Fed should sell dollars and buy foreign currency. By selling dollars, the Fed increases the supply of dollars, which lowers the U.S. exchange rate.
You might also like to view...
The financial intermediaries that the average person interacts with most frequently are
A) exchanges. B) over-the-counter markets. C) finance companies. D) banks.
How does adverse selection affect the economic efficiency of the used car market?
What will be an ideal response?
Which of the following is an important ingredient of efficient economic organization
What will be an ideal response?
Jason works in finance at an MNE. Part of his job is to invest large sums of money in various markets. His latest transaction was investing $10,000 in British pounds for 120 days, then taking the British pounds and investing them in euros for 90 days, and then converting it all back to U.S. dollars. Jason is most likely participating in ________.
A) interest arbitrage B) speculation C) cryptocurrency D) options