To fix the foreign currency price of domestic currency below the free market equilibrium rate, a government must:
A)sell both its own currency and foreign exchange.
B)buy its own currency and sell foreign exchange.
C)buy both its own currency and foreign exchange.
D)sell its own currency and buy foreign exchange.
E)revalue its own currency.

Question

Quizplus · Accepted Answer

To fix the foreign currency price of domestic currency below the free market equilibrium rate, the government must increase the supply of foreign currency and reduce the supply of its own currency. This is achieved by buying its own currency and selling foreign exchange.

To Fix the Foreign Currency Price of Domestic Currency Below