The Central Bank of a Country with a Balance of Payments

Multiple Choice

The central bank of a country with a balance of payments deficit may intervene in foreign exchange markets by selling some of its foreign currency holdings.If it wants to sterilize the intervention the central bank must also

A) purchase government bonds from domestic banks
B) sell government bonds to domestic banks
C) impose ceilings on domestic credit
D) restrict money supply
E) none of the above