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Suppose the Reserve Bank Wants to Keep the Australian Dollar

Question 64

Multiple Choice

Suppose the Reserve Bank wants to keep the Australian dollar at 0.80 cents per U.S. dollar. If the demand for Australian dollars increases,


A) the Reserve Bank conducts persistent intervention on one side of the market.
B) the Reserve Bank sells Australian dollars to increase the supply of dollars and maintain the exchange rate.
C) the Reserve Bank sells Australian dollars to decrease the supply of dollars and maintain the exchange rate.
D) the Reserve Bank buys Australian dollars to increase the supply of dollars and maintain the exchange rate.
E) the Reserve Bank buys Australian dollars to decrease the supply of dollars and maintain the exchange rate.

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