Under a fixed exchange rate regime,if the domestic currency is initially overvalued,that is,below par,the central bank must intervene to purchase the ________ currency by selling ________ assets.

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Under a fixed exchange rate regime, if the domestic currency is initially overvalued (i.e., below par), the central bank must intervene to purchase the domestic currency by selling foreign assets. This is because the overvaluation of the domestic currency makes it more expensive for domestic residents to buy foreign goods and services, and cheaper for foreign residents to buy domestic goods and services. As a result, there will be a net outflow of domestic currency and a net inflow of foreign currency. To prevent the domestic currency from depreciating below its par value, the central bank must intervene by buying domestic currency and selling foreign assets.

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