Saudi Arabia pegs its currency (the riyal, or SAR) to the U.S. dollar. Currently, the exchange rate is SAR3.75 = $US1. Suppose that the Saudi Arabian money multiplier is 1. By how much will the Saudi Arabian money supply change when the Saudi central bank makes loans of SAR 1 million?
A) +SAR 1 million
B) -SAR 1 million
C) +SAR 3.75 million
D) -SAR 3.75 million
Correct Answer:
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