Suppose That, for a Country, Its Money Supply (M^s) Is

question 18

Multiple Choice

Suppose that, for a country, its money supply (M^s) is at the moment equal to its demand for money (M^d) . Now suppose that the country's central bank pumps new money into the economy. The result of this central bank action, other things equal, is that there will be __________ under flexible exchange rates and a consequent __________ of the country's currency.

• A) an incipient balance-of-payments surplus for the country; appreciation
• B) an incipient balance-of-payments surplus for the country; depreciation
• C) an incipient balance-of-payments deficit for the country; appreciation
• D) an incipient balance-of-payments deficit for the country; depreciation