Which of the Following Methods Would the Central Bank NOT

question 59

Multiple Choice

Which of the following methods 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 sell its own currency for foreign reserves when domestic credit contracted.
• C) It would ensure that the domestic money supply stayed constant to maintain uncovered interest and PPP.
• D) It would ensure that the domestic money supply increased to maintain PPP.