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:

Supply Price

The minimum price at which a seller is willing to sell a good or service, often determined by the cost of production and market conditions.

Demand Price

The highest price a consumer is willing to pay for a good or service, influenced by personal value perception and financial capability.

Equilibrium Quantity

The amount of products or services available and sought after at the balance price.

Market for Shrimp

The global marketplace where buyers and sellers trade shrimp, influenced by factors like quality, supply, demand, and seasonal trends.