What is the negative side effect on the money supply of a non-sterilized foreign exchange intervention?
A) A higher money supply eventually leads to lower inflation, and the foreign exchange objective of the central bank's policy may conflict with its abroad goal of price stability.
B) A higher money supply eventually leads to higher inflation, and the foreign exchange objective of the IMF's policy may conflict with its domestic goal of price stability.
C) A higher money supply eventually leads to lower inflation, and the foreign exchange objective of the central bank's policy may conflict with its domestic goal of price stability.
D) A higher money supply eventually leads to higher inflation, and the foreign exchange objective of the central bank's policy may conflict with its domestic goal of price stability.
Answer: D
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