Saudi Arabia Pegs Its Currency (The Riyal, or SAR) to the U.S

Multiple Choice

Saudi Arabia pegs its currency (the riyal, or SAR) to the U.S. dollar. Currently, the exchange rate is SAR3.75 = $US1. Suppose that the Saudi Arabian money multiplier is 1. By how much will the Saudi Arabian money supply change when the Saudi central bank makes loans of SAR 1 million?

A) +SAR 1 million
B) -SAR 1 million
C) +SAR 3.75 million
D) -SAR 3.75 million