1. Foreign exchange market intervention

Suppose the Fed wants the dollar to depreciate. The Fed hopes to accomplish this goal by using $6 billion in U.S. currency in a foreign exchange market intervention.

In order to cause the dollar to depreciate, the Fed will need to $6 billion in the foreign exchange market, while also currency reserves of another country.

Use the following table to show the changes in the balance sheet of the Fed.

Assets	Liabilities
by $6 billion	by $6 billion

This intervention would be classified as foreign exchange intervention, and would have effect on the money supply.

Suppose the Fed wants the dollar to depreciate, but also wants the domestic money supply to remain unchanged.

In addition to the foreign-exchange market intervention you just outlined, the Fed will also need to government securities, thereby the monetary base so that it remains unchanged. This intervention would be classified as foreign exchange intervention since the net result would be no change in the domestic money supply.

Use the following table to show the changes in the Feds balance sheet that result from the Feds policy of counteracting the change in the money supply caused by its previous foreign-exchange market intervention.

Assets	Liabilities
by $6 billion	by $6 billion