Suppose a Central Bank Prevents a Depreciation of Its Currency

question 29

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 fall in aggregate demand

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