If the Fed sells U.S. dollars, the exchange rate
A) rises.
B) does not change.
C) falls.
D) changes, but the direction depends on whether the Fed affected the demand for dollars or the supply of dollars.

Question

Quizplus · Accepted Answer

When the Fed sells U.S. dollars, it increases the supply of dollars in the foreign exchange market, which typically leads to a decrease in the value of the dollar relative to other currencies, meaning the exchange rate falls.

If the Fed Sells U