Figure 15.1: Mexican Pesos Per Dollar

Figure 15.1: Mexican Pesos per Dollar

-Refer to Figure 15.1. The market is initially reflected by S and D₁, but a change in demand moves D₁ to D₂. If the Fed wants the exchange rate to return to where it was initially, it could

A) buy $7 million.
B) increase the money supply by $4 million and buy the surplus..
C) use its pesos to buy $4 million.
D) use its pesos to buy $3 million.
E) selling U.S. dollars equal to $4 million.