When a country intervenes in the foreign exchange market by selling foreign exchange, the domestic money supply declines.

Name: When a country intervenes in the foreign exchange market by selling foreign exchange, the domestic money supply declines.
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Question

Quizplus · Accepted Answer

When a country sells foreign exchange, it effectively buys back its own currency, which decreases the supply of money in the domestic economy, leading to a decline in the domestic money supply.

When a Country Intervenes in the Foreign Exchange Market by Selling