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

Multiple Choice

(Figure: Central Bank Balance Sheet) All points on the fixed line (XZ) 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 on the line, the supply of money is greater than domestic bond holdings so that reserves are greater than zero.
C) at every point to the right of the line, the money supply is backed 100% by reserves.
D) exchange rates will float unless the economy is "on" the fixed line.