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-In the Above Figure, Suppose the Demand for Dollars Temporarily

Question 431

Multiple Choice

-In the above figure, suppose the demand for dollars temporarily increases so that the demand curve shifts to D<sub>1</sub>. To maintain the target exchange rate, the Fed A) cannot maintain the target exchange rate. B) can buy dollars. C) must violate interest rate parity but not purchasing power parity. D) can sell dollars.
-In the above figure, suppose the demand for dollars temporarily increases so that the demand curve shifts to D1. To maintain the target exchange rate, the Fed


A) cannot maintain the target exchange rate.
B) can buy dollars.
C) must violate interest rate parity but not purchasing power parity.
D) can sell dollars.

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