Suppose That the United Kingdom Pegs the Pound to the Euro

Multiple Choice

Suppose that the United Kingdom pegs the pound to the euro. If all other things remain unchanged, what would you expect to happen to European interest rates if all countries who use the euro decided to adopt expansionary fiscal policies?

A) They would rise.
B) They would fall.
C) They would not change.
D) That cannot be determined using the information provided.