Under a fixed exchange rate regime,if the domestic currency is initially undervalued,that is,above par,the central bank must intervene to sell the ________ currency by purchasing ________ assets.

Question

Quizplus · Accepted Answer

When the domestic currency is undervalued in a fixed exchange rate regime, the central bank intervenes by selling the domestic currency to buy foreign assets, which increases the supply of the domestic currency and the demand for foreign currencies, helping to adjust the exchange rate.

Under a Fixed Exchange Rate Regime,if the Domestic Currency Is