Suppose Brazil Has a Floating Exchange Rate, and It Faces

Multiple Choice

Suppose Brazil has a floating exchange rate, and it faces domestic inflation and a trade deficit.Assuming it desires overall balance, if Brazil shrinks its money supply, other things equal one would expect which of the following to occur?

A) inflation to become more severe and the trade deficit to become less severe, an example of policy agreement
B) inflation to become more severe and the trade deficit to become more severe, an example of policy conflict
C) inflation to become less severe and the trade deficit to become less severe, an example of policy agreement
D) inflation to become less severe and the trade deficit to become more severe, an example of policy conflict