The Fed buys $20,000 in foreign reserves. This intervention is sterilized if they also

Question

Quizplus · Accepted Answer

Sterilized intervention involves a central bank buying or selling foreign currency in exchange for their own domestic currency and simultaneously engaging in offsetting transactions to neutralize the impact on the monetary base. In this case, if the Fed buys $20,000 in foreign reserves and sells $20,000 in U.S. bonds, it neutralizes the impact on the monetary base, making it a sterilized intervention.

The Fed Buys $20,000 in Foreign Reserves