With a fixed exchange rate a balance of payments surplus that causes an increase of the domestic money supply is:
A) sterilized.
B) recessionary.
C) deflationary.
D) unsterilized.

Question

Quizplus · Accepted Answer

With a fixed exchange rate, a balance of payments surplus increases the domestic money supply if it is unsterilized. This means the central bank does not intervene to offset the increase in money supply caused by the surplus.

With a Fixed Exchange Rate a Balance of Payments Surplus