Consider That Britain Is Trying to Maintain a Fixed Exchange

question 55

Multiple Choice

Consider that Britain is trying to maintain a fixed exchange rate with respect to the U.S. dollar. However, the present situation in the foreign exchange market is conducive for the British pound to depreciate with respect to the U.S. dollar. If the British government uses unsterilized intervention in the foreign exchange market, then it is expected that:

• A)the British money supply will fall.
• B)the British money supply will rise.
• C)the British money supply will remain unchanged.
• D)Britain is gaining official international reserves.

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Definitions:

Hamate

A carpal bone situated on the lower outside edge of the hand, distinguished by its large hook-like projection.

Femur

The thigh bone, which is the longest and strongest bone in the human body, connecting the hip to the knee.

Tibia

One of the two large bones in the lower leg, the tibia is situated between the knee and ankle, often referred to as the shin bone.

Fibula

A long, thin bone located on the lateral side of the tibia in the lower leg.