If the goal were to decrease the value of a country's currency - to fight an appreciation of the domestic currency in exchange for foreign currency - the central bank would:
A) buy its own currency in exchange for foreign currency.
B) follow a restrictive monetary policy.
C) drive real rates of interest up.
D) sell its own currency in exchange for foreign currency.

Question

Quizplus · Accepted Answer

To decrease the value of the currency, the central bank would need to increase the supply of its currency in the market. They can achieve this by selling their own currency and buying foreign currency. This will increase the supply of their currency, leading to a decrease in its value. Therefore, Choice D is the correct answer.

If the Goal Were to Decrease the Value of a Country's