Assume That There Is an Internal Shock Under Fixed Exchange

Multiple Choice

Assume that there is an internal shock under fixed exchange rates. According to new classical economists, if the government does not intervene, which of the following will occur?
(i) Internal balance will be restored.
(ii) Current account balance will be restored.
(iii) Overall external balance will be restored.

A) (i)
B) Nothing will happen
C) (i) and (iii)
D) (ii) and (iii)