If a Central Bank Does Not Want to Allow the Domestic

question 108

Multiple Choice

If a central bank does not want to allow the domestic currency to appreciate,it will ________ international reserves by selling its currency,thereby ________ the monetary base and increasing the risk of higher inflation.

• A)lose;decreasing
• B)lose;increasing
• C)acquire;decreasing
• D)acquire;increasing

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Definitions:

Mid-Ocean Ridges

Underwater mountain ranges formed by plate tectonics, where new oceanic crust is created by volcanic activity along divergent plate boundaries.

Asthenosphere

The highly viscous, mechanically weak, and ductilely deforming region of the upper mantle of the Earth.

Decompression

The process of reducing pressure in a physical system, often leading to the release of dissolved gases or the formation of bubbles in a liquid.

Solid Mantle

The thick layer of solid rock between the Earth's crust and its liquid outer core, involved in plate tectonics and volcanic activity.