Central Banks Control Exchange Rates by Intervention

Multiple Choice

Central banks control exchange rates by intervention. If a nation such as Japan wished to peg its market rate at a certain level, such as ¥100 = $1, what should it do if the actual market rate begins to depreciate to ¥125 = $1?

A) It should purchase dollars with its own currency.
B) It should sell dollars from its treasury and retire its own currency.
C) It should increase its GDP to increase exports.
D) It should petition the IMF for a rate change.