Question

If the Fed conducts the previous intervention as a sterilized intervention, it would simultaneously      U.S. Treasury securities to offset any change in the money.

True or False: Intervention by central banks has become less effective as foreign exchange activity has increased.

True

False

Answer 1

1.If the Fed conducts the previous intervention as a sterilized intervention, it would simultaneously Buy U.S. Treasury securities to offset any change in the money.

this is called as open market operation This injects the money back into the monetary system

2.Intervention by central banks has become less effective as foreign exchange activity has increased.

this statement is False

if a current sale of foreign exchange by the central bank signals future monetary contraction, then the home currency will appreciate immediately even if the intervention is fully sterilized so that the money supply did not change in the current period