Under the system of pegged exchange rates, when the domestic currency's value presses against the top of its official price range, officials must:

Question

Quizplus · Accepted Answer

When the domestic currency's value presses against the top of its official price range, it means that it is overvalued and there is excess demand for it in the foreign exchange market. Therefore, officials must intervene and sell foreign currency to increase its supply while buying domestic currency to reduce its supply. This will help bring down the value of the domestic currency to its official price range. Option B correctly describes this intervention.

Under the System of Pegged Exchange Rates, When the Domestic