Assume That the Dollar Has Been Consistently Appreciating Over a Long

question 27

Multiple Choice

Assume that the dollar has been consistently appreciating over a long period. The Fed decides to counteract this movement by intervening in the foreign exchange market using nonsterilized intervention. The Fed would:

• A) buy dollars with foreign currency and simultaneously sell Treasury securities for dollars.
• B) buy dollars with foreign currency and simultaneously buy Treasury securities with dollars.
• C) sell dollars for foreign currency and simultaneously sell Treasury securities for dollars.
• D) sell dollars for foreign currency and simultaneously buy Treasury securities with dollars.
• E) None of these are correct.

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Definitions:

First-Degree Price Discrimination

A pricing strategy where a seller charges each customer the maximum price they are willing to pay.

Producer Surplus

The difference between the amount a producer is paid for a good versus what they would have been willing to accept, reflecting the benefit to producers from participating in the market.

Consumer Surplus

The difference between the total amount consumers are willing to pay for a good or service and the total amount they actually pay.

Marginal Revenue Function

A mathematical formula that shows the additional revenue generated by selling one more unit of a good or service.