The European Central Bank (ECB), the central bank of the Eurozone, has determined that the euro is overvalued relative to various other important currencies around the world. In order to help stabilize the euro, which of these actions might the ECB take?

Question

The European Central Bank (ECB), the central bank of the Eurozone, has determined that the euro is overvalued relative to various other important currencies around the world. In order to help stabilize the euro, which of these actions might the ECB take?

Quizplus · Accepted Answer

Selling euros in the foreign exchange market increases the supply of euros, which can help to decrease its value relative to other currencies, thus potentially correcting the overvaluation.

The European Central Bank (ECB), the Central Bank of the Eurozone