Suppose the Fed wants to fix the U.S. dollar/Mexican peso rate at ...

[sammy]

Suppose the Fed wants to fix the U.S. dollar/Mexican peso rate at 11 pesos per dollar under a fixed exchange rate policy. If the exchange rate falls to 10 pesos per dollar, the Fed can
 
  A) buy dollars.
  B) sell dollars.
  C) attempt to freeze all sales of dollars.
  D) any of the above actions could take place.

Question 2

When the Fed buys U.S. government securities from a bank, the Fed
 
  A) loans the money needed to buy the securities to the bank.
  B) increases the bank's reserves at the Fed.
  C) obtains the money for the purchase from the U.S. Treasury.
  D) decreases the monetary base and raises the federal funds rate.

[josephsuarez]

Answer to Question 1

A

Answer to Question 2

B