More on Foreign Exchange Market Intervention If the Fed feels that the price of the dollar in terms of U.K. pounds is unacceptably high, it may choose to intervene directly in the foreign exchange markets. To bolster the pound, the Fed will

(buy, sell) pounds. In the process, the domestic money supply will

(increase, decrease).

In the absence of any sterilization actions by the Fed, domestic interest rates will

(increase, decrease) as a result of the change in the money supply. The change in domestic interest rates will (increase,decrease) the demand for U.S. securities. The dollar will

(appreciate, depreciate) in value. The effect of the change in the money supply has (reinforced, opposed)

the Fed’s actions in the foreign exchange market.