The use of domestic open market operations to counteract the effects of a foreign exchange market intervention on the domestic money supply is known as:
A)normalization.
B)quantitative easing.
C)sterilization.
D)volatilization.
E)depreciation.

Question

Quizplus · Accepted Answer

Sterilization refers to the use of domestic open market operations to neutralize the impact of foreign exchange market intervention on the domestic money supply. It involves the central bank buying or selling domestic securities to offset the inflow or outflow of foreign currency resulting from the intervention. This helps to stabilize the exchange rate while preventing any unintended increase or decrease in the domestic money supply.

The Use of Domestic Open Market Operations to Counteract the Effects