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Suppose an Economy Is Operating Under a fiXed Exchange Rate

Question 38

Multiple Choice

Suppose an economy is operating under a fixed exchange rate regime. If the central bank increases interest rates:


A) there will be an inflow of the domestic currency into the forex market.
B) domestic financial capital will flow out of the country.
C) the supply of money in the economy will fall.
D) there will be an excess demand for the domestic currency in the forex market.

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