(Answered) The danish central bank is committed to maintaining an

Economics

The Danish central bank is committed to maintaining an exchange rate of 7.46 krone per euro exchange rate with a band of 2.25% on either side of this central rate. Under current conditions in the foreign exchange market, nonofficial supply and demand would intersect at a rate of about 7.1 krone per euro. The Danish central bank has sufficient international reserves and uses official intervention to defend the fixed rate.

Draw a demand and supply graph of the foreign exchange market showing the central rate (7.46 krone/euro) and the positions of the nonofficial supply and demand curves.
As a result of the official intervention, what will be the change in Denmark's holdings of international reserves (increase, decrease, or stay the same)? In your explanation, please refer to your graph.

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