Use the Portfolio-Balance Approach to Answer This Question

question 17

Multiple Choice

Use the Portfolio-Balance Approach to answer this question.Other things remaining constant,if the supply of domestic bonds increases,what would happen to the domestic currency?

• A) The domestic currency would appreciate.
• B) The domestic currency would depreciate.
• C) The domestic currency would not change.
• D) The domestic currency would sharply depreciate and then appreciate later.