Intervention in the foreign exchange market by selling foreign exchange causes:
A) the money supply to rise.
B) the money supply to fall.
C) no effect on the money supply.
D) a capital outflow.
E) FDI to decline.

Question

Quizplus · Accepted Answer

Selling foreign exchange by a central bank typically involves selling foreign currency and buying domestic currency, which reduces the domestic money supply.

Intervention in the Foreign Exchange Market by Selling Foreign Exchange