Assume That Policy Makers Are Pursuing a Fixed Exchange Rate

Multiple Choice

Assume that policy makers are pursuing a fixed exchange rate regime and that output is initially less than the natural level of output. The economy will tend to move toward the natural level of output when which of the following occur?

A) A revaluation of the currency.
B) A devaluation of the currency.
C) An increase in the price level.
D) An increase in the domestic interest rate.
E) A decrease in the foreign price level.