The Fed
A) has no influence on the exchange rate.
B) allows a flexible exchange rate, though their actions can impact the exchange rate.
C) sells U.S. dollars to China in an attempt to depreciate the U.S. dollar.
D) alternates between a flexible, fixed, and crawling peg exchange rate policy depending on economic conditions.

Question

Quizplus · Accepted Answer

The Fed allows for a flexible exchange rate, but their actions (such as adjusting interest rates) can impact the exchange rate. Options A and C are incorrect as the Fed can influence the exchange rate. Option D is incorrect as the Fed typically only uses a flexible exchange rate policy.