Everything else held constant,if a central bank makes an unsterilized purchase of foreign assets,then the domestic money supply will ________ and the domestic currency will ________.

Question

Quizplus · Accepted Answer

When a central bank makes an unsterilized purchase of foreign assets, it pays for these assets with its own currency, thereby increasing the domestic money supply. This increase in money supply typically leads to a depreciation of the domestic currency because there is now more of the domestic currency available relative to other currencies.

Everything Else Held Constant,if a Central Bank Makes an Unsterilized