What will happen if a country increases its money supply rapidly under a fixed exchange rate regime?

Question

Quizplus · Accepted Answer

A fixed exchange rate regime imposes monetary discipline on countries and curtails price inflation. For example, if a country increases its money supply by printing more currency, the increase in money supply would lead to price inflation. Given fixed exchange rates, inflation would make the country's goods uncompetitive in world markets, while the prices of imports would become more attractive in that country. The result would be a widening trade deficit in the country, with the country importing more than it exports.

What Will Happen If a Country Increases Its Money Supply