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Suppose that the current dollar/euro exchange rate is $1.5/, but both the US and European central banks believe that the exchange rate should be .8/$.

Suppose that the current dollar/euro exchange rate is $1.5/, but both the US and European central banks believe that the exchange rate should be .8/$. If both nations decide to use sterilized market intervention to achieve the desired exchange rate, which of the following will occur?

The European central bank will sell dollars, buy euros, and conduct and open market sale of European government treasury securities.

The US central bank will buy dollars, sell euros, and conduct and open market purchase of US government treasury securities.

The European central bank will buy dollars, sell euros, and conduct and open market purchase of European government treasury securities.

The US central bank will sell dollars, buy euros, and conduct and open market sale of US government treasury securities.

none of the above

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