A Shock to Domestic Credit, Whereby the Holding of Domestic

Multiple Choice

A shock to domestic credit, whereby the holding of domestic bonds decreases, would result in:

A) a rise in the backing ratio and the need for the central bank to purchase domestic bonds.
B) a fall in the backing ratio and the need for the central bank to sell domestic bonds.
C) a fall in the backing ratio and the need for the central bank to purchase foreign currency reserves.
D) a rise in the backing ratio and the need for the central bank to purchase foreign currency reserves.