FIGURE 34-5 -Refer to Figure 34-5. If the Supply Curve of Foreign

question 81

Multiple Choice

FIGURE 34-5
-Refer to Figure 34-5. If the supply curve of foreign exchange shifts from S0 to S1, the Bank of Canada could maintain a fixed exchange rate at e0 by

• A) selling Canadian currency.
• B) holding foreign reserves constant.
• C) buying foreign currency reserves.
• D) selling foreign currency reserves.
• E) lowering the overnight interest rate.

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