An unsterilized intervention in which domestic currency is purchased by selling foreign assets leads to a rise in international reserves,a decrease in the money supply,and an appreciation of the domestic currency.

Question

Quizplus · Accepted Answer

An unsterilized intervention where domestic currency is purchased by selling foreign assets actually leads to an increase in international reserves and an increase in the money supply, potentially leading to a depreciation of the domestic currency, not an appreciation.

An Unsterilized Intervention in Which Domestic Currency Is Purchased by Selling