Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Sell Euros to increase demand for Songland dollars
B
Buy Euros to decrease the supply of Songland dollars
C
Sell Songland dollars to increase their value
D
Buy Songland dollars to lower interest rates
Understanding the Answer
Let's break down why this is correct
Answer
To appreciate the songland dollar to 0. 58 Euros, Songland's Central Bank needs to increase the value of their currency in the foreign exchange market. They can do this by buying songland dollars with Euros, which creates more demand for their currency. When there is higher demand for the songland dollar, its value goes up compared to the Euro. For example, if the Central Bank decides to buy a large amount of songland dollars using Euros, this action will help raise the exchange rate to the desired level.
Detailed Explanation
Selling Euros increases the demand for Songland dollars. Other options are incorrect because Buying Euros would actually make Songland dollars less valuable; Selling Songland dollars would lower their value.
Key Concepts
Currency Appreciation Mechanisms
Monetary Policy
Foreign Exchange Market
Topic
Currency Appreciation Mechanisms
Difficulty
medium level question
Cognitive Level
understand
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