Multiple Choice
Assume the money supply is backed by bonds and reserves, and the exchange rate is pegged. If the demand for money rises, how might the central bank maintain the peg?
A) by selling back domestic bonds and foreign currency reserves
B) by selling domestic bonds equal to the increase in demand
C) by purchasing reserves equal to the increase in demand
D) by selling reserves equal to the increase in demand
Correct Answer:
Verified
Correct Answer:
Verified
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