To Weaken the Dollar Using Sterilized Intervention, the Fed Will

question 72

Multiple Choice

To weaken the dollar using sterilized intervention, the Fed will ____ U.S. dollars and simultaneously ____ Treasury securities.

• A) buy; sell
• B) sell; sell
• C) sell; buy
• D) buy ; sell

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Definitions:

Net Capital Outflow

The disparity between domestic residents buying foreign assets and foreigners buying domestic assets.

Loanable Funds

The total resources available for lending, determined by the market where borrowers seek funds and lenders provide them, influencing interest rates.

Foreign-Currency Exchange

The process of exchanging one currency for another, determining how much of one currency is worth in terms of another.

Net Capital Outflow

The difference between domestic savings and domestic investment, representing the amount of capital leaving a country to invest abroad minus the capital inflowing from abroad for investment domestically.