Which Method Would the Central Bank NOT Use to Keep

question 45

Multiple Choice

Which method would the central bank NOT use to keep the exchange value of its currency fixed?

• A) It would purchase its own currency for foreign reserves when the domestic credit expanded.
• B) It would ensure that the domestic money supply remained constant.
• C) It would sell its own currency for foreign reserves when domestic credit contracted.
• D) It would ensure that the domestic money supply increased to maintain uncovered interest and PPP.

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