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Card 10 / 19:
A central bank can allow its currency to fall indefinitely, but it cannot allow its currency to rise indefinitely. Why not?
For a currency to fall, a central bank need only supply more of its currency in foreign exchange markets. It can print as much domestic currency as it likes. For a currency to rise, a central bank needs to buy its currency in foreign exchange markets, paying with foreign currency. Since no central bank has an infinite amount of foreign currency reserves, it cannot buy its currency indefinitely.
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