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

Question

Quizplus · Accepted Answer

An unsterilized purchase of foreign assets by the central bank leads to an increase in the money supply in the domestic economy, as the payment for the foreign assets is made in domestic currency. This increase in the money supply leads to a depreciation of the domestic currency as the demand for it decreases. Therefore, the correct answer is option B, purchase and depreciate.

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