Suppose the U

question 110

Multiple Choice

Suppose the U.S.dollar appreciates in value against the Australian dollar, and the Fed intervenes in the foreign exchange market by using U.S.dollars to buy Australian dollars.The Fed could sterilize the expansionary effect of this intervention by:

• A)buying U.S.dollars in the foreign exchange market.
• B)buying U.S.government bonds in the domestic open market.
• C)selling Australian dollars in the foreign exchange market.
• D)selling U.S.government bonds in the domestic open market.
• E)buying Australian dollars in the foreign exchange market.

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Definitions:

Profit-Maximizing

A strategic goal of businesses to achieve the highest possible profit from their operations, often involving decisions on production levels, pricing, and resource allocation.

Pure Monopoly

A situational framework in the economy where a sole provider monopolizes the supply of a particular good or service, without any comparable replacements.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded, usually depicted as downward sloping.

Slopes Downward

Used to describe a graph line that indicates a decrease in one variable as another variable increases, often related to demand curves in economics.