Multiple Choice
The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy was at point A, a triple intersection. Here, the FE curve is flatter than the LM curve. 
In order to maintain the fixed exchange rate, at point B monetary authorities must:
A) buy domestic government bonds.
B) sell domestic currency.
C) buy domestic currency.
D) sell domestic government bonds.
Correct Answer:
Verified
Correct Answer:
Verified
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