If the Federal Reserve buys $3 billion worth of Japanese yen and sells $5 billion of euros,how does this affect the balance of payments?
A)Falls by $2 billion
B)Rises by $2 billion
C)Rises by $3 billion
D)Falls by $5 billion

Question

Quizplus · Accepted Answer

The balance of payments will fall by $2 billion because the Federal Reserve's purchase of yen is an outflow of $3 billion, and the sale of euros is an inflow of $5 billion, resulting in a net outflow of $2 billion.

If the Federal Reserve Buys $3 Billion Worth of Japanese