Multiple Choice
Aruba pegs its currency (the Aruban florin) to the U.S. dollar at a rate of Af 2 = $US1. Suppose that the actual exchange rate is equal to this pegged rate. Which of the following best describes the effect on Aruba's money supply from purchasing dollars?
A) The money supply will increase.
B) The money supply will decrease.
C) The money supply will not change.
D) The money supply will not change as the exchange rate appreciates.
Correct Answer:
Verified
Correct Answer:
Verified
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