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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