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a sterilized foreign exchange intervention part 2 a. always increases the money supply. b. always involves the sale of foreign assets. c. always leaves the money supply unchanged. d. always involves the sale of domestic assets.

Sagot :

A sterilized foreign exchange intervention  always involves the sale of foreign assets.( the correct option is B). Monetary authorities engage in foreign exchange intervention, buying and selling different currencies on the foreign exchange market, to affect foreign currency rates.

Foreign currency intervention aims to stabilise and control excessive volatility in exchange rates. intervention in the foreign exchange market can either expand or contract the money supply. The central bank's foreign reserves are increased when it purchases or sells various currencies, whether they are domestic or foreign. It then triggers an expansion of its money supply. The general definition of direct currency intervention is foreign exchange operations carried out by the monetary authorities with the intention of affecting the exchange rate.

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