If the current exchange rate is higher than the Fed's target exchange rate, the Fed would
A) implement purchasing power parity.
B) implement interest rate parity.
C) buy dollars.
D) sell dollars.

Question

Quizplus · Accepted Answer

If the current exchange rate is higher than the Fed's target, it means the dollar is stronger than desired. To weaken the dollar and lower the exchange rate, the Fed would sell dollars in the foreign exchange market.

If the Current Exchange Rate Is Higher Than the Fed's