Use the following diagram to answer the following questions.
-Refer to Yen. If the United States fixes the exchange rate at 100, what action will be necessary to maintain this rate?
A) The Federal Reserve may use any foreign currency holdings to purchase dollars.
B) The Federal Reserve may purchase any foreign currency using its holdings of dollars.
C) The Federal Reserve must use yen to buy dollars.
D) The Federal Reserve must use dollars to buy yen.
Correct Answer:
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