5. How a foreign exchange intervention by the Treasury affectsthe monetary base Suppose that the Treasury Department wants the U.S. dollar to appreciate against the Brazilian real. The Treasury will order the Federal Reserve Bank of New York to buy of American commercial banks. dollars and sell Brazilian real through the foreign exchange department The following graph shows the market for foreign exchange, where the supply curve depicts the supply of the U.S., dollar and the demand curve depicts the demand for the U.S. dollar. Adjust the following graph to illustrate the actions by the Federal Reserve Bank of New York. U.S. DOLLARS BRAZILIAN REAL 52 Demand for U.S. Dollars QUANTITY OF U.S. DOLLARS The supply of dollars in the foreign exchange market decreases Demand for U.S. Dollars ロー Supply of U.S. Dollars the demand for dollars does not change and thus the value of the dollar rises against the Brazilian real. As a result, the monetary base in the U.S. will not change ▼ because bank reserves will decrease

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
5. How a foreign exchange intervention by the Treasury affectsthe monetary base
Suppose that the Treasury Department wants the U.S. dollar to appreciate against the Brazilian real.
The Treasury will order the Federal Reserve Bank of New York to buy
of American commercial banks.
dollars and sell Brazilian real through the foreign exchange department
The following graph shows the market for foreign exchange, where the supply curve depicts the supply of the U.S., dollar and the demand curve
depicts the demand for the U.S. dollar.
Adjust the following graph to illustrate the actions by the Federal Reserve Bank of New York.
U.S. DOLLARS BRAZILIAN REAL
52
Demand for U.S. Dollars
QUANTITY OF U.S. DOLLARS
The supply of dollars in the foreign exchange market
decreases
Demand for U.S. Dollars
ロー
Supply of U.S. Dollars
the demand for dollars does not change
and thus the value of
the dollar rises against the Brazilian real. As a result, the monetary base in the U.S. will not change ▼ because
bank reserves will decrease
Transcribed Image Text:5. How a foreign exchange intervention by the Treasury affectsthe monetary base Suppose that the Treasury Department wants the U.S. dollar to appreciate against the Brazilian real. The Treasury will order the Federal Reserve Bank of New York to buy of American commercial banks. dollars and sell Brazilian real through the foreign exchange department The following graph shows the market for foreign exchange, where the supply curve depicts the supply of the U.S., dollar and the demand curve depicts the demand for the U.S. dollar. Adjust the following graph to illustrate the actions by the Federal Reserve Bank of New York. U.S. DOLLARS BRAZILIAN REAL 52 Demand for U.S. Dollars QUANTITY OF U.S. DOLLARS The supply of dollars in the foreign exchange market decreases Demand for U.S. Dollars ロー Supply of U.S. Dollars the demand for dollars does not change and thus the value of the dollar rises against the Brazilian real. As a result, the monetary base in the U.S. will not change ▼ because bank reserves will decrease
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education