Under a Fixed Exchange Rate System, an Excess Demand for the Australian

question 4

Multiple Choice

Under a fixed exchange rate system, an excess demand for the Australian dollar in the FOREX market often resulted in:

• A) an increase in liquidity in the financial system and a fall in interest rates.
• B) a decrease in liquidity in the financial system and an increase in interest rates.
• C) a decrease in liquidity in the financial system and a decrease in interest rates.
• D) an increase in liquidity in the financial system and an increase in interest rates.

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