If the Fed Wants to Maintain a Dollar Exchange Rate

question 199

Multiple Choice

If the Fed wants to maintain a dollar exchange rate of 1.20 euros per dollar but the exchange rate rises, then in the short run the Fed can

• A) sell dollars and buy euros.
• B) buy dollars and sell euros.
• C) buy dollars and buy euros.
• D) sell dollars and sell euros.
• E) do nothing.

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Definitions:

Dividend Distribution

The payment of earnings to shareholders, typically in cash or additional shares, approved by the company's board of directors.

Stockholders' Equity

The residual interest in the assets of a corporation remaining after deducting its liabilities, representing ownership equity spread among shareholders.

Common Stock

A form of investment that signifies part ownership in a company, granting the investor the right to participate in voting on business issues and to earn dividends.

Issue Price

The price at which a new issue of securities is offered to the public, determined by the issuer and underwriters.