Suppose a Central Bank Prevents an Appreciation of Its Currency

question 23

Multiple Choice

Suppose a central bank prevents an appreciation of its currency by intervening in the foreign exchange market and selling its currency for foreign currency.Other things equal this also 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.

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Definitions:

Excitatory

Referring to substances or signals that increase the activity of the brain or other body systems, potentially leading to heightened arousal or action.

GABA

GABA (gamma-aminobutyric acid) is the main inhibitory neurotransmitter in the nervous system, playing a critical role in reducing neuronal excitability and regulating muscle tone.

Glutamate

An amino acid that acts as a neurotransmitter in the central nervous system.

Acetylcholine

A neurotransmitter in the nervous system that plays complex roles in transmitting nerve impulses at synapses, including muscle stimulation, attention, arousal, and memory.