Assume That the Fed Performs a Foreign Exchange Intervention in Which

question 113

Multiple Choice

Assume that the Fed performs a foreign exchange intervention in which it does nothing except buy German government bonds. One result of this will be that:

• A) the dollar depreciates.
• B) the euro depreciates.
• C) both the dollar and the euro depreciate.
• D) the dollar appreciates and the euro depreciates.

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Definitions:

Reinforcement Theory

A behavioral theory which posits that behavior can be shaped or modified through rewards or punishments, encouraging or discouraging certain actions.

Reinforcement Theory

A theory in psychology that posits behavior is motivated by its consequences, through rewards or punishments.

Nonbinding Price Floor

A minimum price set by the government that is below the equilibrium price, having no effect on the market price or quantity sold.

Consumers

Consumers are individuals or entities that use or consume goods and services for personal use, not for manufacturing or resale.