A country's currency appreciates and its official holdings of foreign currency increase.The central bank is _______ foreign currency to limit the appreciation, and the official settlements account balance is _______.

Question

Quizplus · Accepted Answer

The central bank is buying foreign currency to limit the appreciation of its own currency, which increases its foreign currency reserves. This results in a negative balance in the official settlements account, as it indicates an outflow of domestic currency.

A Country's Currency Appreciates and Its Official Holdings of Foreign