Under a Floating Exchange Rate Regime, with a Contraction in the Money

question 35

Multiple Choice

Under a floating exchange rate regime, with a contraction in the money supply, which of the following is likely to happen in the short-run?

• A)Increase in the country's holdings of official international reserves
• B)Deficit in the financial account
• C)Inflow of foreign capital
• D)Rise in the domestic price level

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