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-In the Figure Above, Suppose the Demand for Dollars Temporarily

Question 11

Multiple Choice

-In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D<sub>2</sub>. To maintain the target exchange rate, the Fed A) can sell dollars. B) can buy dollars. C) must violate both interest rate parity and purchasing power parity. D) cannot maintain the target exchange rate.
-In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D2. To maintain the target exchange rate, the Fed


A) can sell dollars.
B) can buy dollars.
C) must violate both interest rate parity and purchasing power parity.
D) cannot maintain the target exchange rate.

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