Suppose Policy Makers Are Pursuing a Policy to Fix the Exchange

Multiple Choice

Suppose policy makers are pursuing a policy to fix the exchange rate.In such a system with perfect capital mobility,an open market purchase of domestic bonds by the domestic central bank will eventually result in

A) a permanent increase in the monetary base.
B) a permanent reduction in the monetary base.
C) a change in the composition of the monetary base.
D) a gradual reduction in the domestic interest rate.