Suppose a Central Bank Prevents a Depreciation of Its Currency

question 7

Multiple Choice

Suppose a central bank prevents a depreciation of its currency by intervening in the foreign exchange market and buying its currency with foreign currency.Other things equal this causes the

• A) domestic money supply to decrease and a decline in aggregate demand.
• B) domestic money supply to increase and a decline in aggregate demand.
• C) domestic money supply to decrease and a rise in aggregate demand.
• D) domestic money supply to increase and a rise in aggregate demand.