Under a fixed exchange rate system,

the government bears the responsibility to ensure that the BOP is near zero. If

the sum of the current and capital accounts does not approximate zero, the

government is expected to intervene in the foreign exchange market by buying or

selling official foreign exchange reserves. If the sum of the first two

accounts is GREATER THAN ZERO, a ________ demand for the domestic currency

exists in the world. To preserve the fixed exchange rate, the government must

then intervene in the foreign exchange market and ________ domestic currency

for foreign currencies or gold to bring the BOP back near zero.