If Songland's Central Bank wants to appreciate its currency against the Euro, it can achieve this by increasing interest rates through selling government bonds, which would lead to higher demand for Songland dollars in the foreign exchange market. True or False?

The statement is true. When Songland's Central Bank increases interest rates, it makes Songland dollars more attractive to investors because they can earn more from savings and investments there. To take advantage of these higher returns, investors will want to buy Songland dollars, increasing the demand for the currency. Selling government bonds helps raise interest rates because it reduces the money supply, making each dollar more valuable. For example, if an investor in Europe sees that Songland offers better interest rates, they may sell Euros to buy Songland dollars, causing the value of the dollar to go up against the Euro.