Suppose Country a Pegs Its Nominal Exchange Rate to Country

Multiple Choice

Suppose country A pegs its nominal exchange rate to country B, and that country A has a higher inflation rate than country B. In this situation, country A will experience:

A) a worsening trade position.
B) an increase in the real exchange rate.
C) a decrease in domestic demand.
D) All of the above.
E) None of the above.