A Declining Amount of Foreign-Exchange Reserves Resulting from Maintaining a Pegged

question 120

Multiple Choice

A declining amount of foreign-exchange reserves resulting from maintaining a pegged exchange rate would have which of the following effects?

• A) a decrease in domestic money supply
• B) a negative item entry in the balance of payments statement
• C) rising inflationary pressure
• D) an increase in the supply of local currency coming from this nation's central bank

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