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Under a System of Fixed Exchange Rates,a Large Increase in Export

Question 1

Multiple Choice

Under a system of fixed exchange rates,a large increase in export revenues (without a corresponding jump in imports) has what effect on the domestic money supply?


A) The money supply will increase.
B) The money supply will decline.
C) The money supply will not be affected.
D) The answer depends on whether the central bank has imposed credit controls on the commercial banks.

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