-Refer to Exhibit FF-4. If the U.S. government wants to maintain the foreign exchange rate at 100 yen = $1, and the demand for dollars on the foreign exchange market shifts from D to D^', the government must

Question

Quizplus · Accepted Answer

To maintain the exchange rate at 100 yen = $1 when demand for dollars increases (shifting from D to D^'), the government must supply more dollars to the foreign exchange market. This action increases the supply of dollars, counteracting the increased demand and stabilizing the exchange rate.