Under a Fixed Exchange-Rate System, as a Government Adopts an Expansionary

Multiple Choice

Under a fixed exchange-rate system, as a government adopts an expansionary fiscal policy:

A) the demand for loanable funds increases causing interest rates to rise.
B) the demand for loanable funds decreases causing interest rates to fall.
C) the supply of loanable funds increases causing interest rates to rise.
D) the supply of loanable funds decreases causing interest rates to fall.
E) the demand for loanable funds does not change and interest rates fall.