Suppose That a Central Bank That Fixes Its Exchange Rate

Suppose that a central bank that fixes its exchange rate against other currencies is facing a regular increase of foreign exchange reserves. To offset unwanted changes in the domestic money supply, the central bank could

A) reset the peg to a higher level.
B) reduce domestic interest rates.
C) use a sterilization policy of buying bonds or decreasing banking system reserve requirements.
D) use a sterilization policy of selling bonds or increasing banking system reserve requirements.