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

Question 232

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

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