What Is the Negative Side Effect on the Money Supply

question 11

Multiple Choice

What is the negative side effect on the money supply of a non-sterilized foreign exchange intervention?

• A) A higher money supply eventually leads to lower inflation, and the foreign exchange objective of the central bank's policy may conflict with its abroad goal of price stability.
• B) A higher money supply eventually leads to higher inflation, and the foreign exchange objective of the IMF's policy may conflict with its domestic goal of price stability.
• C) A higher money supply eventually leads to lower inflation, and the foreign exchange objective of the central bank's policy may conflict with its domestic goal of price stability.
• D) A higher money supply eventually leads to higher inflation, and the foreign exchange objective of the central bank's policy may conflict with its domestic goal of price stability.

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Definitions:

Classical Conditioning

A learning process where a neutral stimulus becomes associated with a meaningful stimulus and acquires the capacity to elicit similar responses.

Rescorla

Robert Rescorla, a psychologist best known for his work with Allan Wagner on the Rescorla-Wagner model of classical conditioning, focusing on the predictability of the unconditioned stimulus.

Classical Conditioning

An educational strategy where two stimuli are habitually paired together, causing a response that initially results from the second stimulus to be gradually elicited by the first stimulus.

Likelihood Of Occurrence

Refers to the probability or chance that a given event will happen.