If the Australian central bank wished to cause the AUD to _______,it would _______ AUD and _______ foreign currency.
A) depreciate; buy; sell
B) appreciate; sell; buy
C) depreciate; sell; buy
D) appreciate; buy; buy

Question

Quizplus · Accepted Answer

To cause the Australian dollar to depreciate, the central bank would need to sell AUD and buy foreign currency. This would increase the supply of AUD in the market and decrease its demand, leading to a decline in its value. Option A is incorrect because buying AUD would lead to an appreciation, not a depreciation. Option B is incorrect because selling AUD would lead to a depreciation, not an appreciation. Option D is incorrect because while buying AUD can lead to appreciation, it cannot be followed by buying foreign currency, as this would again cause an increase in demand for AUD and lead to an appreciation.

If the Australian Central Bank Wished to Cause the AUD