If a country wants to keep the value of its currency fixed, then its central bank should
A) sell domestic goods when there is an increase in the supply of its domestic currency.
B) buy domestic goods when there is an increase in the supply of its domestic currency.
C) sell its domestic currency when there is an increase in the supply of that currency.
D) buy its domestic currency when there is an increase in the supply of that currency.

Question

Quizplus · Accepted Answer

To maintain a fixed exchange rate, the central bank should buy its domestic currency to counteract an increase in supply, thus supporting its value.

If a Country Wants to Keep the Value of Its