Unit 7 Notes: 4.13.2015

Official Reserves: 
Foreign currency holdings of the United States Federal Reserve System
When there is a balance of payments surplus the FED accumulates foreign currency and debits the balance of payments
When there is a balance of payments deficit, the FED depletes its reserves of foreign currency and credit balance of payments.
The official reserves zero out the balance of payments

Active vs Passive Official Reserves.
United States is passive in its use if official reserved. It does not seek to manipulate the dollar exchange rate
The People's Republic if China us active in its use of official reserves. It buys and sells dollars in order to maintain a steady exchange rate with the US.