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Suppose a Central Bank Attempts to Peg Its Country's Currency

Question 76

Multiple Choice

Suppose a central bank attempts to peg its country's currency to the dollar. Now interest rates in the United States increase. To maintain the fixed exchange rate, that central bank can


A) sell dollars in the foreign exchange market.
B) reduce the holding of its country's currency.
C) decrease interest rates in its country.
D) sell its country's currency in the foreign exchange market.
E) buy dollars in the foreign exchange market.

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