If a Central Bank Were to Undergo Sterilized Foreign Exchange

question 27

Multiple Choice

If a central bank were to undergo sterilized foreign exchange intervention, it would offset an unwanted appreciation of its currency by

• A) selling foreign reserves and selling domestic credit at the same time.
• B) buying foreign reserves and selling domestic credit at the same time.
• C) selling foreign reserves and buying domestic credit at the same time.
• D) buying foreign reserves and buying domestic credit at the same time.
• E) none of the above.

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Definitions:

Economy as a Whole

A broad view of all the economic activities and transactions in a country or region, encompassing consumer, business, and government spending, investments, and trade balance.

Scarcity Problem

A situation where unlimited wants exceed the limited resources available to fulfill those wants, necessitating prioritization and decision-making.

Economic Wants

Desires for goods and services that individuals and businesses are willing to pay for, which drive economic activity and resource allocation.

Productive Resources

The inputs used in the production of goods and services, including natural resources, human resources, and capital goods.