The Figure Given Below Depicts the Equilibrium Exchange Rate Between

The figure given below depicts the equilibrium exchange rate between the U.S dollar and the Mexican peso.
Figure 13.2

-Refer to Figure 13.2. Given a target exchange rate of MXP 11 = $1 with S1 the relevant supply curve and a decline in Mexican demand for U.S. dollars from D₁ to D₂ the Fed intervenes in the foreign exchange market by:

A) selling Q₃ amount of pesos.
B) selling Q₃ amount of U.S. dollars.
C) buying (Q₂ - Q₁) amount of pesos.
D) buying (Q₁ - Q₃) amount of U.S. dollars.
E) buying (Q₂ - Q₃) amount of U.S dollars.

Correct Answer:

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