(Figure: Central Bank Balance Sheet) All Points on the Fixed

question 102

Multiple Choice

(Figure: Central Bank Balance Sheet) All points on the fixed line (XZ) are so named because:

• A) at every point on the line, the supply of money is equal to bond holdings so that reserves are equal to zero.
• B) at every point on the line, the supply of money is greater than domestic bond holdings so that reserves are greater than zero.
• C) at every point to the right of the line, the money supply is backed 100% by reserves.
• D) exchange rates will float unless the economy is "on" the fixed line.

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