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:

Knock-Out Rule

A legal principle used in international trade disputes, where conflicting terms in a contract cancel each other out.

Different Terms

This term is generally used to describe conditions or items that are not identical or are varying in aspects.

Acceptance

In contract law, the act of agreeing to the terms of an offer, thereby creating a legally binding contract.

Original Offeree

The person to whom an initial offer is made in the context of contract negotiations or dealings.