Under a fiXed Exchange-Rate System, Which of the Following Will

question 166

Multiple Choice

Under a fixed exchange-rate system, which of the following will not occur if the demand for the local currency rises?

• A) The central bank will accumulate foreign-exchange reserves.
• B) The domestic money supply will increase.
• C) As a result of the central bank's actions to maintain the peg, a positive item appears in the balance-of-payments statement.
• D) The economy will experience an increase in inflationary pressure.

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