Exchange Rates and the Balance of Payments (id: 53754730f)

本题目来源于试卷: Exchange Rates and the Balance of Payments，类别为 IB经济学

[单选题]

Given the diagram above, suppose the equilibrium exchange rate for the Canadian dollar (CAD) is at $e_1$. If the Canadian government wishes to fix the exchange rate at $e_2$, it can employ all of the following policies except:

A. increasing domestic interest rates
B. decreasing the purchases of foreign reserves by the nation's central bank
C. increasing the sale of domestic currency in the foreign exchange market by the nation's central bank
D. increasing the sale of foreign reserves by the nation's central bank


参考答案:  C


本题详细解析:

C

$\underset{‾}{\text{Explanation}}$:
C will not cause the CAD to appreciate (e${}_1$ to e${}_2$). Selling more CAD in the foreign exchange market (FOREX) shifts the supply curve of domestic currency to the right leading to its depreciation.

A and B have the same effect of decreasing the supply of CAD in FOREX causing the CAD to appreciate (e${}_1$ to e${}_2$).

D shifts the demand for domestic currency rightward, leading to its appreciation (e${}_1$ to e${}_2$).

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