Question

b. Suppose that the Fed's FX reserves increase by 40 million zees as a result of the decline in demand. How many millions of dollars worth of bonds will the Fed have to sell in order to sterilize the accompanying increase in the domestic money supply

Answer 1

Please see attachment

Step-by-step explanation:

Please see attachment

Answer 2

You didn´t post the complete information of the exercise, I searched the exercise online and tried to ask the most useful question.

Step-by-step explanation:

The Zeeons will respond to the lower U.S interest rates by decreasing their investment in the USA as the rate of return is low. Thus, this will decrease the supply of zees in the foreign exchange market.