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Suppose That a Central Bank Sells Domestic Currency to Buy

Question 3

Multiple Choice

Suppose that a central bank sells domestic currency to buy foreign assets to fix the exchange rate.To sterilize this intervention,the central bank will have to:


A) buy bonds in the open market operations to increase domestic money supply.
B) buy bonds in the open market operations to decrease domestic money supply.
C) sell bonds in the open market operations to increase domestic money supply.
D) sell bonds in the open market operations to decrease domestic money supply.

Correct Answer:

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