Suppose a Central Bank Prevents a Depreciation of Its Currency

question 60

Multiple Choice

Suppose a central bank prevents a depreciation of its currency by intervening in the foreign exchange market and buying its currency with foreign currency.Other things equal, this also causes the

• A) domestic money supply to decrease and a decline in aggregate demand.
• B) domestic money supply to increase and a decline in aggregate demand.
• C) domestic money supply to decrease and a rise in aggregate demand.
• D) domestic money supply to increase and a rise in aggregate demand.

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Definitions:

U.S. Goods

Products that are manufactured, produced, or grown within the United States.

Forward Exchange Rate

An agreed-upon exchange rate for a currency pair to be exchanged at a future date, used in hedging and trading strategies.

Consolidated Statements

Consolidated statements are financial reports that combine the financial results of a parent company and its subsidiaries, presenting the financial position and performance of the entire group as a single entity.

Future Date

A specific date that is in the period after the current date, often referenced in contracts or future planning.