If the Exchange Rate Is Higher Than the Fed's Target

question 62

Multiple Choice

If the exchange rate is higher than the Fed's target exchange rate,the Fed would

• A) implement purchasing power parity.
• B) implement interest rate parity.
• C) buy dollars.
• D) sell dollars.

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Definitions:

Semiannual Payments

Payments made twice a year, often used in the context of bond interest payments or loans.

Annual Rate

The interest rate for a period of one year, not considering compounding.

Interest

A charge for borrowing money, typically a percentage of the amount borrowed.

Future Value

Future value is the value of a current asset at a specified date in the future based on an assumed rate of growth over time.