Assume that the dollar value of a Swiss franc is 0.8600 dollar per franc,and that U.S.importers start to like Swiss watches more than they did in the past.Assume that the Swiss Central Bank wants to keep the Swiss franc fixed at 0.8600.To intervene,they have to:

Question

Quizplus · Accepted Answer

To maintain the fixed exchange rate of 0.8600 dollars per franc, the Swiss Central Bank would need to buy up dollars and sell Swiss francs. This action increases the supply of francs and decreases the supply of dollars in the foreign exchange market, countering the appreciation pressure on the franc due to increased demand from U.S. importers for Swiss watches.

Assume That the Dollar Value of a Swiss Franc Is