Question

Everything else held constant, if a central bank makes an unsterilized sale of foreign assets, then the domestic money supply will ________ and the domestic currency will ________. Question 5 options: A) decrease; appreciate B) increase; depreciate C) decrease; depreciate D) increase; appreciate

Answer 1

Answer:

A) decrease; appreciate

Explanation:

Everything else held constant, if a central bank makes an unsterilized sale of foreign assets, then the domestic money supply will decrease and the domestic currency will appreciate.

Any attempt by the central bank to make an unsterilized sale of foreign assets, the resultant effect will be a decrease in domestic money supply but an appreciation of domestic currency.