(Figure: Central Bank Balance Sheet) All Points on the Floating

Multiple Choice

(Figure: Central Bank Balance Sheet) All points on the floating line are so named because:

A) at every point on the line, the supply of money is equal to bond holdings so that reserves are equal to zero.
B) at every point above the line, the exchange rate floats.
C) at every point below the line, the exchange rate is backed 100% by reserves.
D) exchange rates can only float if the economy is "on" the floating line.