If a central bank does not want to allow the domestic currency to appreciate,it will ________ international reserves by selling its currency,thereby ________ the monetary base and increasing the risk of higher inflation.

Question

Quizplus · Accepted Answer

If a central bank does not want to allow the domestic currency to appreciate, it will acquire international reserves by selling its currency. This increases the supply of domestic currency in the market, which would increase the monetary base, and in turn increase the risk of higher inflation.

If a Central Bank Does Not Want to Allow the Domestic