If the central bank pegs the exchange rate above its free-market equilibrium level,there will be a(n)________ of foreign exchange and the central bank will ________ foreign currency.

Question

Quizplus · Accepted Answer

When the exchange rate is pegged above the equilibrium level, there is an excess supply of foreign exchange, and the central bank will purchase the excess foreign currency to maintain the pegged rate.

If the Central Bank Pegs the Exchange Rate Above Its