When the Federal Reserve (acting through member commercial banks) sells U.S. dollars in the foreign exchange market, it ____ the supply of U.S. dollars and hence tends to ____ the value of the U.S. dollar relative to other currencies.

Question

Quizplus · Accepted Answer

Selling U.S. dollars in the foreign exchange market increases the supply of dollars, which, according to the law of supply and demand, tends to lower its value relative to other currencies.

When the Federal Reserve (Acting Through Member Commercial Banks) Sells