For a country with a fixed exchange rate that engages in sterilized intervention

Question

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Sterilized intervention involves a central bank buying or selling foreign currency in exchange for its own currency to influence the exchange rate, while simultaneously engaging in offsetting transactions in the domestic bond market to neutralize the impact on the domestic money supply. This process can indeed short-circuit the normal adjustment mechanisms in the foreign exchange market (A), requires the central bank to sell assets if its currency is undervalued to support its value (B), and to buy assets if its currency is overvalued to decrease its value (C).

For a Country with a Fixed Exchange Rate That Engages