If a central bank engages in an unsterilized foreign-exchange intervention with the intention of raising the foreign-exchange value of its currency,
A)the central bank's holdings of international reserves will fall.
B)the domestic money supply will rise.
C)domestic interest rates will fall.
D)it will buy foreign assets.

Question

Quizplus · Accepted Answer

When a central bank engages in an unsterilized foreign-exchange intervention to raise the value of its currency, it sells domestic currency in exchange for foreign currency, reducing its holdings of international reserves.

If a Central Bank Engages in an Unsterilized Foreign-Exchange Intervention