If the Fed announces that it will decrease the U.S. interest rates, and European Central Bank takes no action, then the value of euro will ____ against the value of U.S. dollar. The Fed's action is called ____ intervention.
A) appreciate; direct
B) depreciate; direct
C) appreciate; indirect
D) depreciate; indirect

Question

Quizplus · Accepted Answer

When the Fed decreases U.S. interest rates, it typically leads to a depreciation of the U.S. dollar, causing the euro to appreciate against it. This is an indirect intervention as it influences the currency value through interest rate changes rather than direct market actions.

If the Fed Announces That It Will Decrease the U