Question $5$

The yen$-$dollar exchange rate is $100$ yen $$1,$ but the yen suddenly depreciates to $120$

yen $\frac{?}{?}$$$1.$ Then which is true with non sterilized intervention by the Bank of Japan

designed to get the exchange rate back to $100$ yen $\frac{?}{?}$$$1?$

A$)$ The Bank of Japan sells dollars in the foreign exchange market, the Bank of Japan's

foreign exchange reserves rise, the Japanese money supply rises and the rate of interest in

Japan falls.

B$)$ The Bank of Japan sells dollars in the foreign exchange market, the Bank of Japan's

foreign exchange reserves fall, the Japanese money supply rises and the rate of interest in

Japan rises.

C$)$ The Bank of Japan sells dollars in the foreign exchange market, the Bank of Japan's

foreign exchange reserves fall, the Japanese money supply falls and the rate of interest in

Japan rises.

D$)$ The Bank of Japan buys dollars in the foreign exchange market, the Bank of Japan's

foreign exchange reserves fall, the Japanese money supply falls and the rate of interest in

Japan rises.

E$)$ The Bank of Japan buys dollars in the foreign exchange market, the Bank of Japan's

foreign exchange reserves rise, the Japanese money supply rises and the rate of interest in

Japan falls.

F$)$ None of the above