Suppose a Central Bank Prevents a Depreciation of Its Currency

question 15

Multiple Choice

Suppose a central bank prevents a depreciation of its currency by intervening in the foreign exchange market and buying its currency with foreign currency.This causes the

• A) domestic money supply to decrease and a decline in aggregate demand
• B) domestic money supply to increase and a decline in aggregate demand
• C) domestic money supply to decrease and a rise in aggregate demand
• D) domestic money supply to increase and a rise in aggregate demand

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Definitions:

Possession

The control or ownership of something, whether personal property or real estate.

Demand Instrument

A financial document requiring payment to the holder on demand.

Uniform Commercial Code

A standardized set of laws that regulate financial contracts and transactions in the United States to facilitate commerce.

Time Of Payment

The specific date or schedule agreed upon for payment to be made in a transaction.