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

Question 426

Multiple Choice

-In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D<sub>2</sub>. To maintain the target exchange rate, the Fed A) must violate both interest rate parity and purchasing power parity. B) can buy dollars. C) cannot maintain the target exchange rate. D) can sell dollars.
-In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D2. To maintain the target exchange rate, the Fed


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

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