Epsilon is a country whose unit of currency is the omega. New information leads people to expect that the omega will appreciate next year. To keep the foreign exchange value of the omega fairly steady, the Bank of Epsilon will ________ enough omegas on the foreign exchange market so that the ________ omegas will ________.
A) buy; demand for; increase
B) sell; supply of; increase
C) buy; demand for; decrease
D) buy; supply of; decrease

Question

Quizplus · Accepted Answer

To counteract the expected appreciation of the omega, the Bank of Epsilon would sell omegas on the foreign exchange market. This action increases the supply of omegas, which can help keep its value steady by preventing it from appreciating too much.

Epsilon Is a Country Whose Unit of Currency Is the Omega