If a central bank wishes to lower the foreign-exchange value of its currency, it will
A)buy domestic currency and sell foreign assets.
B)sell domestic currency and buy foreign assets.
C)attempt to raise domestic interest rates.
D)attempt to lower the domestic price level relative to foreign price levels.

Question

Quizplus · Accepted Answer

Selling domestic currency and buying foreign assets will increase the supply of the domestic currency, decreasing its value in the foreign-exchange market. This will also increase the demand for the foreign currency, leading to an increase in its value.

If a Central Bank Wishes to Lower the Foreign-Exchange Value