Suppose That in a Country with Exchange Controls That the Demand

Multiple Choice

Suppose that in a country with exchange controls that the demand for foreign exchange is increasing faster than the supply of foreign exchange. In this case a likely result would be:

A) a depreciating currency.
B) a shortage of foreign exchange.
C) no change in the real exchange rate.
D) that the government needs to increase aggregate demand.
E) that the price level rises rapidly.