How does the Fed intervene in the foreign exchange market and what the effects are of the Fed's actions?
What will be an ideal response?
The Fed intervenes in the foreign exchange market and changes the value of the exchange rate by buying or selling dollars. If the Fed wants to raise the exchange rate and appreciate the dollar, the Fed will buy dollars. By buying dollars the Fed increases the demand for dollars and raises the exchange rate. If the Fed wants to lower the exchange rate and depreciate the dollar, the Fed will sell dollars. By selling dollars the Fed increases the supply of dollars and lowers the exchange rate.
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If the Fed carries out an open market operation and sells U.S. government securities, the federal funds rate ________ and the quantity of reserves ________
A) falls; decreases B) rises; increases C) rises; decreases D) rises; does not change E) falls; increases
Demographic handicaps and discrimination are primarily responsible for the extent of poverty
Indicate whether the statement is true or false