Suppose the currency price of the U.S. dollar in terms of the Japanese yen starts to fall. To prevent that from occurring, the U.S. central bank should

Question

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To prevent the U.S. dollar from falling in value against the Japanese yen, the U.S. central bank should use its yen reserves to buy U.S. dollars in the foreign exchange market. This action increases the demand for U.S. dollars relative to the yen, thereby supporting or potentially increasing the value of the U.S. dollar against the yen.

Suppose the Currency Price of the U