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Open Market Operations and Exchange

APMACR-1G6EEY

Suppose the U.S. Federal Reserve decided to purchase bonds in an Open Market Operation.

What would be the effect, ceteris paribus, on a trading partner's currency such as Great Britain?

A

Depreciate.

B

Appreciate.

C

Appreciation because that action would violate G8 requirements and spark a trade war against the U.S..

D

Remain unchanged.

E

Depreciate in the long-run but not in the short run.