Consider that Britain is trying to maintain a fixed exchange rate with respect to the U.S. dollar. However, the present situation in the foreign exchange market is conducive for the British pound to depreciate with respect to the U.S. dollar. A fully sterilized intervention in the foreign exchange market by the British government is expected to cause:

Question

Quizplus · Accepted Answer

A fully sterilized intervention involves the central bank buying or selling domestic currency in exchange for foreign currency in the forex market and simultaneously conducting open market operations to offset the impact on the money supply. Therefore, the British money supply would remain unchanged.

Consider That Britain Is Trying to Maintain a Fixed Exchange