If a country under a fixed exchange rate regime wanted to pursue contractionary policies, ceteris paribus,
A) net exports would rise and capital inflows would fall, putting offsetting pressure on the exchange rate.
B) net exports would fall and capital inflows would rise, putting offsetting pressure on the exchange rate.
C) net exports and capital inflows would rise, and upward pressure would be placed on the exchange rate.
D) net exports and capital inflows would fall, and downward pressure would be placed on the exchange rate.
Correct Answer:
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